Day Review: 25th of February 2016

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The day that finally a major support and resistance (SR) level is broken, 1940. In previous posts (here, here and here), we identified 1920 and 1940 as key market levels. Today we have seen finally the bounce out of 1920 and the market breaking through 1940. Let’s analyse how this action was visible using the XBP volume and tape indicators.

(1.1) The XBP Bulls and Bears Support and Resistance Levels (XBP BB SR for short) indicator, plots support lines (red) and resistance lines (white) whenever the market forces change. Today we saw 4 supports printed, the first two at or very near 1920. This confirmed our theory that 1920 was a key support and resistance level and gave us the security that the market will face strong support anytime it approached this level.

(1.2) The first resistance of the day, printed right at the open was very near to the resistance level during the intraday session and both to the 1940 level. As per our previous analysis, we knew that 1940 is a key resistance level. Later on the day (right arrow in 1.2) we see how the resistance becomes support and the market rallies.

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XBP Market Players indicator allow us to further analyse the volume activity of the day. Blue bars are printed when big volume enters the market and green bars when that volume is the biggest so far for the day. The later in the day the green bars appear the more significant they are. Yellow bars signal low volume.

(2.1) This green bar at 09:10 (as per 4,500 ticks chart) just touching 1920 is the moment that the big money enters and buys the market.

(2.2) These 3 green bars (analysed as well in the mid day review post here) are a sign of professional traders getting easy money. It is to expect that retail traders (small traders like you and me) will place their stops behind “safe walls”, like the open of the day, the high of the day, or maybe some Fibonacci level. This is well known by the big players, so they can make the market rally and capture all those stops. You can see this action with the blue bar immediately before the first green bar. That blue bar appears right at the day open level. Right after that green bars at the high of the day. Very easy money. But having 1 blue bar and 3 green bars is not just running stops, but as well entering the market. It is too much volume for just hitting stops. After the bounce at 1940, blue bars appear again to finally push the market higher.

Putting all together:

Add (1.1) and (2.1) and you have a change in the market forces to the upside and big volume buying the lows. Add (1.2) and (2.2) and you have a resistance changing to support in the market forces and a lot of volume buying the market.

With the XBP indicators you can easily identify the market bottom at (1.1) + (2.1) and the breakout of a key resistance level at (1.2) + (2.2).

Remember, these indicators are not mathematical interpretation of the market, like Fibonacci levels, Elliott Waves, nor price based indicators like MACD, Moving Averages, etc. The XBP indicators analyze volume, price and the tape. They give you a “behind the scenes” perspective that traditional indicators cannot.

Enjoy your trading!

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