I had the temerity to suggest on Friday that the savage moves in US markets were likely to be fake given the holiday season and as such we would see a potential reversal, once the volume had been confirmed at the close of the session. This indeed is the case as we start a new trading week following the Thanksgiving Holiday and in addition, this short-termism is further confirmed with the volatility indicator. So doubly confirmed.
If we start with the price action and volume on the YM Emini, although any of the three indices mirror this analysis, Friday closed with a wide spread down candle on high volume. However, when we compare this volume with other candles, for such a dramatic move we should expect to see substantially more, and hence we can conclude this was indeed a shakeout as expected, with the market makers moving in to accumulate additional stock sold off in the ensuing panic concerning a new Covid variant. In addition, there are two other technical factors on the daily chart we need to consider. First, we have the volume point of control ( the yellow dashed line) coming into play in the 34,700 area and acting as a solid platform of support to Friday’s sell-off. Second, we have a strong area of price-based support denoted with the red dashed line of the accumulation and distribution indicator for NinjaTrader. This describes levels by importance so the thicker the line, the stronger they are. Indeed this level helped to provide support on Friday and saw the price close just above on the day and as I highlighted earlier, the volatility indicator triggered signals a move outside the average true range – no great surprise! But what we can expect, and are witnessing now, is one of two things – either a reversal or at the very least congestion within the spread of the candle over the next few days as traders and investors take stock and reassess the latest virus news.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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