Accumulation Distribution With The New Buy Sell Pressure Indicator

Accumulation Distribution

This week I identified two instances of Accumulation Distribution after the trading day.  Previously I had said in the trading manual that you identify Accumulation Distribution as the market bounces between red and green intermediate zones, so it looks like Christmas tree lights.  Now I was able to see Accumulation and Distribution from the new Buy Sell Pressure indicator.  Fortunately for me, I was on the right side of one of these and took a small profit on the other.

Wednesday 4/26/17

This is a trade from Wednesday 4/26/17 at the end of the day.  Normally I would stay away from this scenario but because of news events, I was looking for an opportunity to short. In the picture below you see how each time the indicator spiked between 1442 and 1450 you had immediate selling and a V shape pattern.  I entered the trade where I have drawn the solid red vertical line and immediately had 2 points in my pocket and I relaxed a little.

My relaxation would not last long.  Price came back and I found myself with 3 ticks of adverse excursion, but what was worse is that the Buy Sell Pressure indicator was solid green and going sideways.  There wasn’t a sharp V shape this time.  But what was interesting and I only realized after the fact was that this was a distribution, as price could not even reach the blue counter trend zone.

4/26/17 Afternoon Distribution Trade
4/26/17 Afternoon Distribution Trade

Currency Tool

Here is what the currency tool looked like which shows the entry and exit to my trade.  At around 1532 hours there was a strong move down in the correlated currencies and I was back to relaxation mode while I waited for an exit.

4/26/17 Currency Chart
4/26/17 Currency Chart

Normally when the Buy Sell Pressure Indicator is solid green, price is rising. Even when the solid green lines’ slope is falling price is normally rising. We can see this in these two trades from the morning of 4/26/17 in the picture below. These were two huge long trend trades with perfect setups.  In the first trade you again see a distribution after price reaches 2390 at 1054 hours.  This is confirmed by the accumulation distribution indicator in the bottom panel.  There is a positive sloping green line but price goes nowhere until there is a small retracement.

But after the second trend trade price first rises on a flat slope dark green line then rises significantly on a downward sloping line.  Those shorts have been forced to give up and cover their positions and this is again confirmed by the Accumulation Distribution indicator on the bottom.

4/26/17 Distribution Morning Trade
4/26/17 Distribution Morning Trade

What I expect to see from price happens when the line is a dark green color after 1110 hours.

The next picture below is the end of that move up.  I have placed a vertical red line where the indicator turns light green and where the indicator flips from green to red.  Also on this chart you see a successful Tick Divergence trade with some very nice divergence in the indicator at the time of the trade and the next long trend trade also.  Notice all the reasons not to take the Tick Divergence short trade at 1211 hours.

4/26/17 Tick Divergence Trade
4/26/17 Tick Divergence Trade

Monday 4/24/17

This last picture is from Monday 4/24/17.  I was short from the intermediate resistance zone. Look at the dark red color in the indicator where I got short.  Price came down to the blue countertrend support zone.  Normally I would take profit here, but because the indicator was solid red, I held the trade.  When price rose to the intermediate zone I exited the trade with a small profit. I did this because the market was not reacting as I had expected it to.  There was an unsloping line but I hadn’t seen this before.  Then a distribution takes place again at the blue counter trend zone.  I did not short this because the indicator was solid dark green.

4/24/17 Accumulation Distribution
4/24/17 Accumulation Distribution

 This last chart is from the open on 4/24/17. You can see how when the indicator is solid red and going sideways and we have price moving as expected.

4/24/17 Open
4/24/17 Open

Conclusion

I did not identify the Accumulation Distribution pattern with the indicator until after the Wednesday trade when I went back and reviewed what had happened.  I had recognized the zones bouncing between intermediate support and resistance. The trade from Monday was also stuck in my mind because of how the price did not fall.  This is when I learned how to spot Accumulation or Distribution using the new indicator.

In reviewing my trade from Wednesday I was very lucky.  As price moved against me I considered taking a small loss. I decided against it because my stop was just two ticks away.  At that point it really didn’t matter and I stuck with the trade because of the theory I had going into the close.

The purpose of the post is not to identify a trading opportunity, but exactly the opposite.  The lesson to be learned is from what happened on Monday as I was holding for a deeper target.  If you find yourself in a trade such as I did on Monday and price reverses, you need to be prepared to immediately say you are wrong and wipe the trade.

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