1. Ultra High volume bar. Any time I see one of these (on any timeframe and relative to surrounding volume) I sit up and take notice. Only professional traders create this amount of activity....and volume=activity. They also distribute their positions on up moves. So when one of these volume spikes appear...professional money has stepped in to take control.
2. My VSA software identified that bar as weakness.
3. When PA (price action) revisited that area, it did so on much lower volume....lack of interest in higher prices at that level.
4. Secondary weakness appeared in the form of an 'upthrust'.
Here's the same setup but coming out of a move lower:
Big downward volume spike
Price action revisits that area on much lower volume....,professional money not interested in moving the market lower at that time.
A 'no supply' candle
If you step back and examine the longer timeframe (60 min chart), Price action has moved up into a prior area of distribution by the professional traders and was rejected by an 'upthrust' candle.
The 5 min is showing signs of weakness as well. Look at the up volume as price tries to reach the previous high.
Crude oil futures rollover today to the 12-15 contract. Since the crude futures close at 2:30 pm, That volume spike could very well have been long positions being liquidated.
Looking at a potential short setup. Working off the highest volume candle of the day, I'm looking for an entry based on a successful test or a no demand setup.
Highest volume of the day just came into crude oil off the inventory report. Definitely buying on that volume spike. I will watch for a low volume pullback into that high volume bar.
