The market maker is creating a buying tail from the 30 min chart by doing the last leg of down thrust, or shake out.
This washed out the weak long speculative inventory removing future floating supply.
Usually a wash out is needed after a long consolidation. A break above 12675 would confirmed that the last leg was merely a shake out.
Watch the game played by the market maker around the VWAP.
VWAP is the level that is watched by many. Hence the MM loves to make a weak posture to attract people to short at the VWAP.
What followed is an upthrust running the stops above that level before dropping the bids.
I have had a sucker short in CAC at the second peak. It is a terrible way to end the morning of my birth day.
However, market maker loves to attract in suckers, like me, to short into the double top.
They wait and wait until they got enough suckers in the position, put down a hidden limit order above the double top and lift the order stopping out the suckers.
As you can see big market sell orders appeared at the high. This is where the pros are selling.
If I want to stay in this business, think more like the market maker.
DAX has opened in yesterday's value after the trap low and reverse in the afternoon of US session.
Anyone who has shorted below yesterday's value are in deep trouble. This should be used as fire to grind towards first the VAH and then the high of the cash session of yesterday to squeeze the shorts even more.
I would like to build my short position when it trades above 12750.
DAX has tested the VAH to the tick. It is a sign of the buying are purely mechanical buying done by the market maker and short term traders.
Not the long term fund money.
In this 240 min chart, we can see that DAX has bounced off the POC of last month, 12582, to the tick during yesterday's nightly session.
Hence the bounce is also technical.
So what went wrong with my CAC wolfe wave long?
In fact the CAC indeed bounced from the low reaching the daily VWAP. However, this didn't happen until the market maker shook out the speculative long inventories.
WHy? Because those longs are going to become the floating supply when the price is lifted making the bullish drive much heavier.
Once again, if I could think more like a market maker, I would be able to execute the trade better.
Was not able to trade yesterday afternoon as I have to babysit.
DAX has broken out of the consolidation range I have marked yesterday morning. Look at how it retested the range high after the NY open. There is a small reaccumulation range right at the range high.
As we speak right now, DAX is trading solidly above the weekly VWAP , which means on average the shorts are under water and are feeling the pain. The emotional selling of the Monday and Tuesday could just be a short in the hole. But the market usually turns when one side is feeling pumped up. It is possible that some big hand trader is waiting for the price to trade above the VWAP to initiate a short as the funds are not allowed to short below VWAP or long above VWAP. Some funds even only allow buy when price is 1 std dev below the VWAP. This VWAP could be daily VWAP if you are a day trader or weekly VWAP if you are operating more in a swing trade time frame.
By looking at the TPO chart, we have the value overlapping higher. This is a typical when a market is moving in a corrective phase. Look above, the area between 12780 and 12840 are not fully auctioned, it could be the location for DAX to build some value there before making the next impulsive move, most likely to the down side. There is still the chance that the DAX would rip through the tick value area between 12850 and 13000 in the next few weeks. But that is not very probable as we are moving closer to the summer holiday period, there won't be such a determination and energy available for DAX to break through the barrier of heavy volumes (trapped traders). Hence the game plan is still to look for failures above yesterday's high as yesterday's high is very likely to be run by the market maker to squeeze shorts before a true turn around.
