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.

Ahead of the close

The Nifty futures profile chart as of 2.10 pm is below :

We saw an open drive which was the longer time frame player stepping up.

Value now is being built at the upper end of the single prints from 18th March.

Holding 5460 this market can move up to 5527/ 5556 by tomorrow.

5500 is also the series Point of Control and slow distribution was expected here this morning.

The BankNifty at 10950, SBI at 2640 and RIL at 1011 are at crucial points for the day.All reference levels of importance.

Power of Profile

Here is the analysis posted last night on Vtrender-2 for the Nifty .


Monday, February 28, 2011
Profile charts for 1st march
Posted by Shai at 9:58 PM




- Nifty closed at the developing POC indicating balance for the day
- Buyers are holding the levels at 5304-5314, below which Nifty failed to auction today.
- 5304 will be a stop and reverse level for longs with target of 5229 below and 5391 above
- an auction back to 5391 will complete a balance profile for a directional 150 point (min) move either side.

When everybody was bearish, we played neutral as POC told us that buyers were in the market and longs with a stop n reverse at 5304 would have been an excellent risk/reward trade.

Order Flow : 11th FEb

Earlier today, we noticed a not very confident probe of price below value lows, though the distance covered was around 45 points to 5175 levels.

What was noticeable was an important part of the index - the banks not moving below value or to new lows.

If you had watched the value areas closely especially the relevance of the point of control, it was not at all a difficult day to trade today.

The OrderFlow charts made the job even easier. Take a look :



Order Flow suggested buyers coming to replace reluctant sellers at 5194.These confident buyers managed to take the Nifty up to 5328 in one continuous move measuring 134 points.



The BN got resisted at VAH early in the morning, but once it broke through there was no stopping. I tried to take a counter trend trade around 10265 levels, but had to quickly give up to persistent buyers for a minor 30 points of profits.When the previous highs around 10290 were taken, there was no looking back.

The profile charts of today throw interesting possibilities for Monday, many of which we will discuss in the webinar tomorrow.

So if you have not registered for it yet, try the link at the top right of the blog or send a mail to vtrender@gmail.com.

Market profile is one study which can call the major levels and the moves of the market right, 90 % of the time.So if you are still struggling in your trading, start reading up about profile.Your trading will get the edge it requires!

Nifty- Intra

Earlier this morning the market tried to auction unsuccessfully over the region of the 3 day balance profile.

The move failed and the rejection was even swifter playing out part one of the two likely scenarios mentioned yesterday



As the market groped around the 5476-5487 area to watch mentioned, we saw an OF continuing to be dominantly red, indicating that longs would have to be aggressive in nature at that point.

A probe back to VAL was rejected subsequently and the markets are currently at 5444 down a 100 points from value area high.

Nifty Update

We were trading the January Future yesterday, but for tomorrow's action we'll shift focus to the Feb futures.

Why?

There's a reason. At all times in the market we are looking for the presence of a longer term player who has a view of the market of more than one day. That person will be trading the feb tomorrow and it will be left to the day time frame to negotiate the Jan particularly from noon.Also we are "volume people" and there will be more volumes in the feb than in Jan tomorrow.

Here's a chart of Feb Action :



Looking at this chart I only remember one saying which I learn't years back : " From failed moves come fast moves".

As the Nifty opened above the previous excess zone of 5775 ( 5750 in Jan future) and buyers made a conscious attempt to stay above that level, the news flow in the afternoon was responsible to create a small selling tail at the top and a breakdown below value and Monday's open price added to the downside momentum before the High Volume Node from 20th Jan ( pink dashed line) arrested the downtrend.

The market continues to be in balance in the weekly time frame and only a break down below feb level of 5640 will invite fresh selling.

Bank Nifty :

In my last post on Bank Nifty I had stressed on the importance of the 10930 zone as well as the auction of the 14th of jan as a defining point for the Bank Nifty.

Have a look at what happened since :



The break above brought 11290, but the subsequent sell-off has brought us back to last friday's closing level exactly.

The profiles are each marked in the rectangles alongside.

From the current closing level, 10973 on the upside and 10873 on the downside should be watched for direction.