In yesterday’s post on Tesla, I spent some time explaining the importance of benchmarking when using the volume price analysis methodology, and the daily chart for copper is another classic example of this in action. Briefly, benchmarking allows us to compare volume and the associated price moves to ascertain whether the price action we are seeing is in agreement or disagreement. The benchmark candle and volume we select in history is just that – it gives us something against which to judge the current price action and whether Wyckoff’s third law has been met. In other words, are effort and result in agreement, and if not it is an anomaly and requires further investigation for clues as to where the market is heading next.
This was the case with the daily chart for copper and my analysis of the 13th September which you can read here :
https://www.annacoulling.com/commodities/the-daily-chart-for-copper-delivers-a-nice-example-of-wyckoffs-third-law-in-action/. In this post, we considered the candle of the 12th of September which was wide and up, yet the volume was in disagreement when compared to our benchmark candle.
In other words, the volume was insufficient for such a dramatic move so we can conclude the big operators are not participating, confirming a trap move is in progress with a reversal likely. And as expected from this simple analysis, we have seen copper sell off strongly from the high of $4.45lbs to a low of close to $4.10 as the price continues to oscillate around the volume point of control at $4.28lbs and denoted with the yellow dashed line. On the downside, volume on the VPOC histogram falls away dramatically offering little in the way of volume support, highlighting the potential for copper to move lower down to $4.0lbs in due course. However, for the time being, I expect the metal to continue to oscillate in the current wide range.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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