How To Read Signals From A Chart

Two examples of Distributions

All distributions (the market top-ranges where stock/coins/contracts change hands, from professional pockets to public pockets) strat with FOMO buying bar.

Then scenarios develop an endless number of variations. However, the principles remain the same.

On the left - penny stock market, daily TF.
We have there:
1/ FOMO
2/ ND
3/ ND
4/ Final SLKT
5/ Bearish change, Bulls Trapped.

On the right side, we have ETHUSD, 15m, yesterdays' action.
1/ FOMO
2/ SLKT
3/ SLKT
4/ ND
5/ Bearish Change, Supply Pressure.

As you can see, move number 5 appears in a very fast way, without enough time to think and join bears.
Which chart provides better odds to establish shorts?

As for me, left.
Final SLKT above round number 3.0 with the next two down-bars (confirmations of SLKT) gives an opportunity to short with placing SL above SLKT.

Right Chart with distribution range above 130 doesn't provide such setup? Or where would you like to short ETH?

You mean broker?
I am not authorized to recommend brokers.
Visit https://www.forexfactory.com/brokers.php

EURUSD has entered the down-trend stage

Check up one of my previous posts. it was dedicated to types of distributions - here is one more example from forex market. The triangle on the chart corresponds with the previous post about balances and unbalances.

1/ FOMO Buying. I am very suspicious about real volume on this chart, because the volume should be much higher. But volumes on forex are a tricky subjects.
2/ Supply pressure entering from old highs. Early Bearish Change in Character
3/ SLKT above the FOMO bar with penetration of old highs. Note how quickly price quickly reversed down after penetration of resistance lines. Probably, this SLKT was produced with help of so-called "good" publications in fake news media/
4/ Here is another Supply Pressure-bar. And One more Bearish Change in Character around 1.117
5/ Minor Trap
6/ Minor Trap before breakdown. Fake bounce up from support.
7/ Final Breakdown. That trader who bought the EURUSD contracts during 13-20 Trading Range now finding themselves in bad positions. Very low odds to escape from losses.

I see a target for down-trend around 1.103
Beware of bottom yellow support line.

GBPUSD update

We have a Zone of Strength on background (green square). It started from breaking down the bearish trend-channel in the late July days. This breakdown acceleration produced a panic feeling (I bet, news was very "bad"). Then we got a sequence of accumulation - EVRB (absorbing the panic - blue circle), SLKB (the secondary test) and the Final Trap.

You can suppose - why Oleg is telling these old patterns from deep history? Because they repeat one after another on many market.

Note how price did breakout through the top red line on the mid-Oct days:
11/Oct - DB
14/Oct - testing of supply, sellers were inactive. This can be seen by NS bar. NS told to professionals market is strong
15/Oct - bullish response to NS on the previous day, and breakout above red line.

How could we interpret the latest events? What is the outlook for the nearest future?

1/ FOMO Manipulation. Some "good news" arrived and price pumped into the overbought zone of the current green channel.
2/ Attempt to ris on low volume. No bullish power. Clos on the low, demand is weak.
3/ Supply bar
4/ Price touched the center line of the up-ward channel. Note the slight increase in volume in comparison with the previous day. It seems to be a minor Panic experience under 1.30 round level.

Current bar is green, price rejected to develop further in bearish way. But look the volume - it is too small.

What is the future?

Google me to find out more

hristmas is the perfect time for Manipulations
December 26, 2019
Holiday season is the perfect time for Manipulations when a market is low-active
Below you can find the schematic for Manipulation.

Let’s assume you are a Big market operator and manipulator.

1. You create two sub-accounts and Robots,
2. You sell from sub-account One to sub-account Two. Price drives a bit lower.
3. You sell from sub-account Two to sub-account One. Price drives a bit lower.
4. Again you sell from sub-account One to sub-account Two. Price drives a bit lower.
5. One more you sell from sub-account Two to sub-account One. Price drives a bit lower.
   
   And so on. Your robot will do all this selling from Pocket One to Pocket Two. These operations can be processed within a seconds.
   
   Your assets remain the same, you only spend commissions (but as a market maker, you have about-zero commissions)

At the same time, the lowering of price increases the number of triggered Stop-Losses of other traders (buyers). It means, existing longs liquidate (sell-stop). As an operator, you have a preference to buy it. In this way, you grab others’ assets from their pockets to your pocket Three. Level by Level, you accumulate in Pocket Three a lot of assets at a bargain price.
You stop your robot, the price naturally backs up toward the previous levels. Profit.
The described mechanic is my deductions and opinion only. Thanks for reading.

As you can see, I plotted the green zone of strength on recent background, this is a current level of support. It was formed by EVRB+NS+DB+testing.

And now ATOM bulls are struggling through the old zone of weakness (red square).
This zone is caused by heavy Supply wave from mid-July days.

The most recent sequence is bullish as we have DB after NS after mini-SLKB.

The latest bar (not closed yet) has poor closing so far. This is bad indication to be positive further. Nevertheless, you can not reject the relative strength of this market as it acts stronger than other coins.

So, pullback and another attempt of bulls look as rational expectations.

Here is the first 2020 post. I wish you the best trades and happiness

Now, let's back to charts.

JPY is oversold

If you trade forex then you could not miss the recent JPY falling. Notable rallies are registered on EURJPY, AUDJPY, USDJPY markets.
For example, on the EURJPY daily TF chart, the price climbed above 122 level and reached the top line of the upward channel. Technically, the resistance should come into play.
Now, JPY has entered into the oversold zone. Just look at the Ratios Chart.



The Crowd Ratio moved to Buy orders. The Cruel market should play a painful game with them (produce a step down). That is why, IMO, we should expect the correctional movement.

What are Chart Reading signs are messaging to us?


1/ Too deep pullback. Red wave has erased the total progress of extra-high-volume-green bar. This is not very positive signs.
2/ The shape of weakness (red triangle formation) confirms that Supply has existed at 122.22
3/ This is SLKB under the previous minor lows. Bulls have a chance to overcome today's highs, but it will be too difficult for them. Demand seems to be exhausted now.

TOTAL view on the Global Crypto market
January 14, 2020

BTCUSD is looking like trending upwards after several bullish impulses. Let’s scale into the bigger picture and find out:

1. where are we now
2. what is next

I use the TOTAL chart (above). TOTAL – is a special instrument. It shows the crypto market capitalization index, calculated by Tradingview charts.
I use the Renko style in order to: remove noisy movements and focus on the big moves.

Let’s read the story from chart

1. 1] The downward channel on deep background. The bearish trend within 2018 year
2. 2] Bullish efforts in 2019 to breakout through over the red bearish channel. A green circle represents the activity of bulls to get control over the market. The successful breakout above the top red line confirmed the dominance of bulls. The crypto industry raised above 200B Cap level and stated. 200B – is too small for Crypto World.
3. 3] FOMO bullish Culmination in June 2019 when Cap achieved 360B. Since that moment, price of coins moved down and pushed TOTAL again under 200B. But what is interesting.
4. 4] The volumes are huge on down-wave. Let’s assume it was Panic Selling Activity – the Instance when Professionals absorb cheap instruments (coins, stocks, currencies).
5. 5] Current rally pushed up TOTAL above 200B level again. This major zone confirms its support for the crypto industry.
6. 6] Technical SHS pattern also produces confidence for bulls

OKAY, what is next?
Will the violet circle of strength from December 2019 be the new violet circle of strength from December 2020?
Why not? I’ve described some bullish facts already above.
And here is another one from mister Elliott and his wave theory.
If Dec/2018 lows and Jun/2019 highs form the impulse wave 1, then Dec/2019 low is new higher low and the end of correctional wave 2-3. Point 3 perfectly matches with Fibo.
It is more clearly visible on the Wave chart below (the green zone is the level [8] of support).

If described suggestions are true, then we are at the beginning of new impulse wave 3-4. In Elliott’s structures, this wave has much power. Do you know, where classical wave theory has the target for point 4? Look at the number [9]. It gives projection to… 34500. OMG
Let’s see how bulls can handle breaking above the red line overhead.

BTCUSD update

Recently, BTC produced a series of pumps. Price rallied from 7k to 8700 (25%) within 2 weeks. Bulls confirmed - they alive. Here is the first serious exam for bulls.

Note the red line. This line is the line of a major downward trend channel. It started in mid-2019 months. Now price is approaching this resistance, and we have facts of weakness from the chart. Market sends messages - it will be hard for bulls to overcome red line.

Here is the story:
1] Demand Bar. Still strong...
2] This is an early warning. Volume increased, but progress decreased. It means smaller result (price gains) versus bigger effort (volume activity). This is typical behavior when price enters into the zone of Weakness. it caused by massive SELL-Limits (like taking profits from longs).
3] Red bar. Confirmation of weakness on the previous bar.

What is the reason for minor reactions consolidations? What is REAL the action is taking place beneath the bars?

Let me try to explain. This is a topic for the current post. We will use EURUSD chart, h4 TF.



1+2] We have the major downtrend channel. The channel is formed by two lines. As price slides down withing the bearish channel, the down-trend becomes obvious for more and more people (crowd, traders, etc). And they try to benefit from this decline. How? They shorts.
As a result, bearish positions collect more and more profits [3].
But the market is not designed for making profits for people. Even when the market wants to move to the new lower ground, it can not allow making big profits for people. This is how minor rally [4] occurs.
As price reversed upwards, people think the bearish trend is over. They close shorts and enter longs. Temporarily, more profits have bulls [5].
Note [6] EVRT bar (high volume buyings without great progress). This is "a start of the ending" of the correctional up-move. SLKT - [7] - "the end of the end" of the correctional up-move. At that moment, Enough people entered longs and closed shorts. That is why the market is ready to resume downtrend [8].
[9] selling pressure - SB
[10] test of the Resistance from SB (test of RFSB) - Watch my yesterday's video for more details.
[11] - Minor SLKT
[12] Here the market did not want to reach the bottom line. In this case, too many people would collect profits.
[13] Reaching the bottom line of the downtrend channel. Expect sideways churning

How to project targets?
The wider accumulation - the bigger advance.
The wider distribution - the bigger decline.
This is Wyckoff style. Use PNF chart.

For example, on EURUSD chart:
1 column of accumulation = approx 0.015% of future advance
1 column of distribution = approx 0.015% of future decline
The logic is simple. But the practice is not easy.

Important note, Tradingview 1m data has not deep history, so provided calculations are not so reliable. Proportions calculated only for demonstrative purposes.

Bullish Points and Figures

For this post, I use the point-n-figure chart of Total (Crypto Market index). PNF chart gives another fresh view of the market when analysts mess in bars and candles. Normally, classical PNF charts don't translate data about volume, but Tradingview PNF allows us to add volume to every column. And this feature adds a great value.

Let's look TOTAL on the wide view.
1] Great pump from spring/2019. Big volume represents the effort of bulls to overcome the black line of resistance. Their effort accompanied by great progress in price advance. By thus, bulls claimed their control over this level. That is why I plotted green square here.

Last Nov-Dec days, the price did back down to the green square. And what can we read from the chart?


2] Panic volume. A fast decline in price attracted people to sell their coins.
3] Absorption of Panic. Extra-high volume but little progress for bears. It means major interests open their pockets (BUY-LIMITs) to fill them with cheap cryptos.
4] Selling pressure exhausted. Red volumes go smaller on every next column. Time for bulls to stop hiding and get on stage.
5] Bullish change. Price pumps amid increasing volume.

Currently, TOTAL already broke the black line of resistance. Bulls defended their Green Zone. Now the price is heading up. We have an A-B-C sequence of rising extremums. Project new extremum. Point D should be higher than B.

How to identify a valid SHS pattern
using PNF chart with volume indicator

Example from the EURJPY market. I use the recent SHS (head and shoulders pattern) to demonstrates some not-so-difficult concepts that will give you the great help to distinguish a fake SHS pattern from real.

I like to use PNF because they are able to reduce "noise" as well as divide markets into up and down waves (rough but acceptable).



This SHS pattern (I've outlined it with green triangles and S1-H-S2 marks) made a top for the small uptrend initiated by the down-move [1] (uptrends always initiated by the down-move, while downtrends always initiated by the up-move). I've outlined this minor uptrend with 3 blue upward lines.

Now let's study exactly the SHS pattern.
2] Extremely high volume. I tend to interpret extremely high-volume moves as potential hidden weakness signs.
3] Immediately after column [2] we got the effort of bears. Note, this is the biggest volume on among many previous red columns. This effort pushed the price back down to the levels where impulse [2] was started. The big red volume represents the bearish warning by itself, but combined with notable effect - chart reader becomes informed about supply is heavy around S1 high.
4] Another attempt. Price penetrated the S1 high, but just a bit and very quickly did back down to the start-level of the impulse. Another bearish behavior.
I call these triangles as the Shape-of-Weakness (Abnormal green vertical spike with further smooth decline which erases all progress of the vertical impulse).
5] This is the start of a new bullish attempt. Price bounced from the central-line of the up-trend channel. But this rally was quickly hit by...
6] ...high volume supply-column.

The SHS pattern is formed. Taking into account the described story - bears have the odds. This SHS increases its potential to turn into the down-trend move.

7] The central line of the upward channel is broken. Almost the End for bulls. No chances for bulls to use the support from the center-line of the up-trend channel.
8] Bottom-line of the uptrend channel also broken by this supply-column. The market switched into the down-trend mode.

Where to open shorts?
IMO, stages from [decline-after-4] to [8] have enough argumentation to open short positions.

How to increase the confidence in opening shorts?
Firstly, note the SHS formed at round number 121.00. So, this psychological level revealed its bearish influence.
Secondly, we have a major decline in the background (not shown on this chart). So, selling activity is matching the big picture context (the way to increase success probability).

Hope this study was helpful for you.

Hi Oleg first of all my compliments for this thread, very interesting. Some questions:
1) which is the technical difference between Panic and Sklb ? Both are wide down bar and close in the middle
(the same thing among Fomo and Sklt). How do I recognize one from another ?
2) when I watch charts principally I see DB or SB and not the other ones patterns.
3) Travelling on Internet I have found other patterns as Buying and selling Climax, Upthrust, Test up and down,
Shake out and Stopping Volume. But in your lessons you don't speak about these ones. Why ?
Are they not important '

Thank you a lot for your kind reply.