If Nifty doesn't close above 17450 in the coming days, we are possibly going to see a correction. In that case, the 17430-17440 zone will mark the local top in Nifty. This is obviously an ambitious idea, and it's early to assess the move. If I turn out to be wrong, then it would be a lesson and if I turn out to be right, then it will improve my confidence in my concepts. Win-win in both cases!
Explanation (from Stockcharts): PSY—Preliminary supply, where large interests begin to unload shares in quantity after a pronounced up-move. Volume expands and price spread widens, signaling that a change in trend may be approaching.
BC—Buying climax, during which there are often marked increases in volume and price spread. The force of buying reaches a climax, with heavy or urgent buying by the public being filled by professional interests at prices near a top. A BC often coincides with a great earnings report or other good news, since the large operators require huge demand from the public to sell their shares without depressing the stock price.
AR—Automatic reaction. With intense buying substantially diminished after the BC and heavy supply continuing, an AR takes place. The low of this selloff helps define the lower boundary of the distribution TR.
ST—Secondary test, in which price revisits the area of the BC to test the demand/supply balance at these price levels. For a top to be confirmed, supply must outweigh demand; volume and spread should thus decrease as price approaches the resistance area of the BC. An ST may take the form of an upthrust (UT), in which price moves above the resistance represented by the BC and possibly other STs before quickly reversing to close below resistance. After a UT, price often tests the lower boundary of the TR.
SOW—Sign of weakness, observable as a down-move to (or slightly past) the lower boundary of the TR, usually occurring on increased spread and volume. The AR and the initial SOW(s) indicate a change of character in the price action of the stock: supply is now dominant.
LPSY—Last point of supply. After testing support on a SOW, a feeble rally on narrow spread shows that the market is having considerable difficulty advancing. This inability to rally may be due to weak demand, substantial supply or both. LPSYs represent an exhaustion of demand and the last waves of large operators’ distribution before markdown begins in earnest.
UTAD—Upthrust after distribution. It occurs in the latter stages of the TR and provides a definitive test of new demand after a breakout above TR resistance.
Disclaimer: This is NOT investment advice. This chart is meant for learning purposes only. Invest your capital at your own risk.
I use self developed indicator which work on same concept. Looking at chart you shared and signals coming from my indicator are identical on 15 min chart. I worked on indicator after reading the concepts of VSA and tried to apply it my trading. So far i have seen that nothing beats the information provided by candle spread + volume activity.
Thanks for putting this detailed analysis.
johntradingwick
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@MrGaggi, You are welcome :) Is your indicator available in the public library or is it private?
MrGaggi
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@johntradingwick, It's a private indicator as it is not as polished to share in public.
johntradingwick
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@MrGaggi, If you don't mind, can I get a copy of the code?
MrGaggi
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@johntradingwick, Sorry won't be able to share indicator I am using but I built it on concept used in Compressed Volume Levels [DepthHouse] indicator. I think it's a paid indicator but you can avail a trial to checkout it's functioning. Mine has used same underlying concept to find opportunity where volume and price could give effective resistance and support levels. I developed mine around VSA concepts more. You can search public library for VSA based indicators. I am planning to refine my indicator and release it in coming weeks. I will sure share it with you then.
Thanks for putting this detailed analysis.