Barrometrics Views: The Wide Range Breakout Day
On Thursday, on the S&P (basis cash), we saw a day with a 26 point range and a Normalised Volume Reading of 5,107,846,144. Since May 8 (Left Shoulder of aborted H&S), the daily range has been 16 points with standard deviation of 6 points and Normalised Mean Volume of 4,025,661,196.
I tell you this because over the next 2 blogs, I’ll be considering a bar I call a Wide Range Breakout Bar.
A wide range breakout bar is one where:
- the range is at least greater than mean and preferably, mean + 1 to below mean +2. And,
- the volume is also with greater than mean and preferably, mean + 1 to below mean +2.
- the structure is one where at least 50% of the bar is above the breakout point and the bar exhibits buying conviction (for an upside breakout) i.e. we have a close now lower than in the top third of the range and the open no higher than in the bottom third of the range.
- the breakout is NOT concurrent with a major news event e.g. a CPI release.
If I see a wide range breakout bar, I will assume I shall not see a pullback to the breakout point – a response I consider to be the norm.
If we examine Thursday’s bar, we see that it has qualified on all 4 grounds (Figure 1).
FIGURE 1 WRB Thursday July 23 with Normalised Volume.
Charts courtesy of Market Volume
With a WRB what I expect to happen is for the market to test the 50% level of the directional move and then resume the move in the direction of the breakout. Figure 2 shows that this is what occurred on Friday.
Figure 2 30-minute Chart with Market Profile
Charts courtesy of Market-Analyst
So on this basis, can we conclude that ES will resume its upmove tonight? Unfortunately, the situation is not as clear as I’d like it to be. More tomorrow.
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