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Example 1: Again if you look at the chart for March 18th (figure 19), you will notice that as the market rose from the 10:12 low of 5311 to the 10:38 high of 5336, the volume increases. The increase in volume is evidence of resistance; as the market rises so it meets more sellers, until the buyers are exhausted and the sellers gain the upper hand, forcing the price back down. Figure 19 43 Example 2: Another example comes from later in the same day. Figure 20 Here we see a bearish reversal bar with increased volume (figure 20). The market appears to have made a decisive upward thrust, but is clearly met with resistance. The strong bullish bar, four bars before the reversal bar, is accompanied by the highest volume, which suggests that this upward thrust may not be as decisive as it appears. After this bar the market trades in a narrow range before breaking to the high of 5334 where more selling resistance was uncovered and the bearish reversal bar was formed. It is easy to see why many traders would be trapped into buying as the market broke out of the top of the 44 trading range set earlier in the afternoon; but when you take into account volume, a different picture emerges. After the formation of the bearish reversal bar the market falls sharply away (figure 21). The first indication that the fall is abating comes in the bounce at 17:12 (red bar below) and again at 17:28 (final bar below), both reversal bars on higher volume. Figure 21 We see evidence here of support, but as 17:30 (16:30 UK) is effectively the close of the futures market (as it is the close of the cask market), I would not 45 open a new position. Interestingly though, the open the next day is at 5330 and the June FTSE goes on to make a morning high of 5345. 46 Example 3: Here is a more recent example. Figure 22 |
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