This week in Following the Auction, we’re looking at ‘singles’ on a market profile chart. A ‘single’ is a market profile term representing one or more TPOs that stand alone within a whole day’s profile. Keeping in mind market profile is not a trading system but a way of organizing data, one cannot understand profile development without recognizing one fundamental fact, it’s an auction. Let’s start with a picture, the easiest way to explain, please click to enlarge.
Given the market is continually moving from balance to imbalance and this process plays out over all time frames, this is how the day time-frame on 4/9/15 developed. Looking at the 3 charts above, the first a regular 30 minute candle chart. The second is a Market Profile chart in an expanded view (each TPO, covers a price increment on the horizontal scale, the same as a candlestick). The balance areas circled in yellow are where price has rotated back and forth between unfair highs and lows, probing to search for and confirm value. High volume nodes are formed in this process and are another way of saying time spend at price = value.
Here are the 3 things all traders must understand about single prints…
- Single prints are the opposite of value! They express a perceived change in value and a participant driven, generally emotionally charged, auction to a new price level. Singles are the opposite of High Volume Nodes or HVNs which develop out of the rotational nature of price movement in an accepted area and = value.
- Single prints are a sign of strong conviction by either buyers or sellers. Singles are frequently seen on trend days as price extends from balance to balance, as well as on balance days at the range extremes as buying or selling tails. A line of singles can mark reversals in trend and show rejection with price either too cheap or too expensive at that point in time.
- Single prints are key day-trading references. In an uptrending market, a pullback to an area of singles, if sentiment has not changed will represent a buying opportunity. However context is king and a long term bullish trend has many smaller time-frame bearish days, even weeks. If a price above an expanse of ‘bullish conviction singles’ is deemed ‘too expensive’ by the auction participants, a trading opportunity also exists… the single prints below will be retraced, without a doubt.
Last week the market developed a balance area between 2065 and and 2080. Friday’s low at 2066.75 left the profile with an 8 tick (singles) buying tail, showing rejection out of the lower extreme of the range. The if/then scenario became to test the top of the range and possible continuation as the balance area was quite developed. And that’s exactly what happened, the entire balance area was traversed! Then after spending some time building value at the upper end of balance, price made another push higher, then chopped into the close. The chart below goes back to mid-February and shows the recent balance circled in yellow with the prominent VPOC at 2074.50 in pink below price and another prominent VPOC at 2101 from the prior balance area above. A magnet and also an area to watch as previously prices above 2100 have shown little ability to attract new buyers, could earnings season change that? We’ve heard positive and negative excuses for quarterly results, and projections. As always with any auction, price is the advertising mechanism, regulated by time, the success of which is determined by volume. The end of an auction is marked by excess, balance, followed by decline. Whether you’re bullish or bearish keep an eye on volume near these highs for indication of acceptance or rejection on this third attempt to be solidly accepted above 2100.
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Have a great week! Trade smarter! Never more often…
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