Crude oil is another commodity which has an interesting technical picture and certainly one for volume aficionados as there is a clear anomaly which has already delivered for those in the know. And it is the daily candle of Thursday last week to which the eye is drawn for two reasons. First its relationship with volume, and second the volatility indicator which was triggered as a result of the wide spread price action.
If we start with the price action, the fall on the day was the biggest on the chart, and therefore by extension, we should expect volume to reflect this fact, if it is a genuine move and one in which the big operators are participating. What is immediately clear is this is not the case. Whilst the volume is above average there are other down candles of lesser spread, but with higher volume, suggesting this is likely to be a trapping move and not a genuine one. In other words, the price is being marked down without participation and therefore likely to reverse soon after.
This fact was confirmed by the second event, the trigger of the volatility indicator which sends a clear signal of price moving outside the average true range for the instrument, and as such the likelihood of congestion to follow or a full blown reversal. The reason for this is not hard to appreciate. Fast-moving markets trigger FOMO, the fear of missing out, and more so for those nervous traders who have been waiting on the sidelines who finally take courage and enter, more often near the bottom ( or top) of such moves and who are then trapped in weak positions. This is the power of this indicator which can reveal future market direction with oil trading gapped up on Friday and inside the spread of the candle as expected. A solid reversal based on two different signals.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
Hi Anna. Thanks for your article. Effectively the Crude Oil is in a congestion area after that big drop down. I would like to understand a little bit more about the Volatility indicator you mentioned which triggered in your analysis. How would I understand more about it? Many thanks!
Kind Regards,
Sergio A.
Hi Sergio – many thanks for getting in touch and you can find all the details on the indicator at https://quantumtrading.com – you will find all the details and also videos on the indicator also here for MT4/5 https://mt4.quantumtrading.com/videos/dynamic-volatility-indicator-videos/ – hope this helps and all best wishes – Anna
hi anna , my name its sergio cordoba , i got your book VPA its a great book but i need a one to one tutor to fully take advantage of all the info, i know you may be supper busy to do that yourself but you may have someone in mind that will be willing to show me the ropes for a fee , i am so eager to lear, i understand the whole book but when it come to practice i can’t put it together, hope you can help me with that, i currently have the TNT platform
Hi Sergio – many thanks and glad you enjoyed reading the book and what I would suggest as a start is joining David and myself in our weekly webinars which you can find on my site. And I also offer the Complete Forex Trading Program which you can find at https://quantumtradingeducation.com which includes a complete module on volume price analysis as part of the course and which will take you to the next level. I cannot offer any mentoring suggestions – apologies Hope this helps and thanks once again and wishing you every success in your trading.