Steidlmayer Distribution

Markets exist to facilitate trade. In the OrderFlow exchange which happens across various time frames, it is important to step back and always assess which time frame of the market is controlling the price moves.

We have seen an up-down april series so far, with the move which started from march 21 off 5577 levels ( actually from the bottom of that large bracket closer to 5370) running into rough weather near 5940 NF levels.

At today's close we are at 5766 off 200 points from the highs seen recently.

Often when the market is on the verge of a large move, either direction I tend to look at the market through the Steidlmayer 4 step process also called Steidlmayer distribution.

Before we go into the chart, let's understand what the Steidlmayer distribution actually is :

A Steidlmayer Distribution has four parts:

1) It begins with a directional move which we call an Initial Price Movement (IPM).Most of the time a trend day starts a new development. An IPM is one time frame activity or a series of directional bars with few or no overlapping ranges and retracements.

2) Rotation begins and with it, the formation of the Point of Control ( POC) . A pure rotation should have POC moving sideways.This later takes the shape of a bell curve.This also brings an end to the IPM


3) From this sideways movement, the market moves into a b shaped profile or a p shaped profile.The "b" shaped profile is bearish and the "p" shaped profile is bullish.


4) Distribution completes and usually from the Point of Control of the completed distribution, a new IPM forms that either moves in the original direction or accepts above 50% of the IPM range. If the latter occurs, the IPM will go on to form either a larger sideways market or the start of a new directional trend.

Here's a chart of the Nifty future as a daily profile.

In the chart we have an initial price movement off 5577 levels followed by a sideways move. We alos saw evidence of minus development yesterday and and an auction today which was at the lower end of yesterday's profile. Ideally tomorrow we are set up for a move back into the balance zone of last week or a move below 5715 NF which may bring levels of 5630/ 10 below. The balanced profile of today also confirms a range break out happening.

Let's look at another chart which has merged profiles.I prefer to look at these charts as the structure is based on market movement.

The merged profile shows a bell curve near the top and a b shaped profile at the close today, signaling a possible end to the sideways movement.

The Steidlmayer distribution is bearishly tilted at the moment and a confirmation would be a break below 5717 tomorrow. However should it hold ( 5717) the possibility of a rotation back upto 5836 cannot be ruled out also.

If that happens, the sideways move will be prolonged.