What are the Things to Look for in a Uptrust?
1. High Volume and How high?
2. Wide Spread?
3. Close, near or on the Low?
4. What was the previous bar action?
5. Did the bar into new territory?
6. Is the stock in an up trend?
The Answers for the above would decide how potent the Upthrust is.
High volume Upthrust are a sure indication of weakness, higher the Volume the stronger the indication. It may be even wise to get out of the stock if the Upthrust has ultra high volume.
Wider the spread more potent the Upthrust
Lower the closer the stronger the indication of weakness. Ideally it should close should be the Low. If the close is towards the middle it would mean than the SM was not successful in marking the price down. There was too much demand.
An ideal Upthrust will move into new territory. The High will be very much higher than the high of the previous bar. This means the SM was really successful in marking the price up and many traders get trapped into bad positions in the end of the day.
Upthrusts are effective when the trend has been in force for some time. Sometime you would find weak up thrusts in early trends.
Many times you will Upthrusts with low volume. I call them Pseudo Upthrusts. These are not effective as the Upthrust. But are still signs of weakness..
We looked at the Upthrust and Pseudo Upthrsts.. We also looked at what to look for in an Upthrust Bar.
What to do when we see an Upthrust?
The next bar after the Upthrust is very important. That helps us decide our action.
If the next bar is a Downbar closing down it is clear that the weakness and set in and the immediate trend is reversing. Here again the volume is an important indication. If the volume is high then it time to get out and wait to short. If the volume is low the weakness is not so pronounce and it may be worthwhile to wait and watch next bar movement. Here the spread and the position of Bar also give clues. If the Bar is wide closing down the weakness is more pronounced. Also if the high of the bar is towards the low of the Upthrust bar the weakness is enhanced.
If the down bar is with low volume and closing Up then the weakness of the upthrust bar is still in question. We have to wait for the enxt bar for confirmation.
If the Bar after the Upthrust bar is an Upbar closing up then it would mean that the weakness projected by the upthrust is negated.
