"Buy low, sell high" is the most quotable quote in trading. So simple yet so elusive. With the Dow Jones Industrial Average^SM setting all time record highs seemingly every other day, the "buy low" side of the equation seems a bit askew.  Evaluating the stamina of the next “possible” Bull Run can be as nerve wracking as deciding whether or not you are going to participate. When markets enter into uncharted territory, traders need trading tools that decipher how this uncharted price action is being constructed. You want to see how the market handles new highs, if the climb is vertical or in building blocks, how the market handles pull-backs, and how solid the support and resistance areas are. Volume at price in a comparable format will give you a multi-dimensional view of how the market is building its new trading range. Comparing the volume accumulation as the week progresses allows you to gauge demand as new perimeters are being made. You want confirmation that the market is establishing upward support as it continues its climb.

The week's trade of October 16-20, 2006, in the Chicago Board of Trade's Dec06 mini-sized Dow^SM futures contract is a good example of the fundamentals and the technicals aligned together to set record highs and closing prices. Combining a standard bar chart with the Chart-Ex Week vs.. Day volume at price chart, you can graphically visualize how the market is building its support/resistance areas.

Here is an example of how to combine two trading tools to derive market entry/exit points for the Dec06 min-sized Dow for the Monday October 23, 2006 trading session.

Below are two charts for the Dec06 mini-sized Dow: 1). Standard 3 month daily bar chart, 2). Chart-Ex Week vs.. Day chart.

 

 

 

 

 

 

 

1). The standard bar chart shows that the H/L chart lines formed support around the 12,000 area on Wednesday, Thursday and Friday, October18- October20, 2006.

2). The Chart-Ex Week vs.. Day chart below, for the week of October 16-20, 2006, trade action confirms the high volume distribution in the 12,000 area for the week. You can also see that Friday's low of 19,999 was supported by the weekly high volume area.

 

 

 

 

 

 

 

 

 

 

 

 

3). Setting up market entry/exit traders can use the 12,000 area for support to buy into the market. My entry point would be on Monday's opening price of 12,058 with a stop loss in the 19,990-19,960 area.

4). Buying into the market in the lower band of 12,000 area allows traders to use the 12,000 support area to minimize their risk and have the staying power of being on the long side as the market continues its move to the upside.

The Dec06 mini-sized Dow on Monday, October 23, 2006, was at 12143, up 95 points for the day.

When markets enter into uncharted territory, either on the upside or down side, traders need and want trading tools that give an in-depth view of the building blocks for the market's price action.  Using the Chart-Ex volume at price tool in conjunction with other fundamental and/or technical tools will give traders one more piece of information that can minimize their risk for market entry/exit points.

About the Author
Lisa Erdmier is President of Chart-Ex, LLC. Chart-Ex is a web-based company that offers a new proprietary data visualization tool that displays comparative price action on a single central axis with cumulative volume at each price. The Chart-Ex display keys into the growing demand from traders and investors that want to see volume at price in one concise model.

The Chart-Ex displays above facilitate in determining market entry/exit points. Click on www.chart-ex.com to use the FREE trading tool that uncovers the dynamics of the market's momentum by offering Market numbers and Volume at price.

Chart-Ex's co-founders, Lisa and Doug Erdmier, each have over 25 years experience and involvement in the securities and futures markets. Lisa Erdmier began her 25-year plus involvement in commodities and equities as a technical analyst for Merrill Lynch, John Eckstein, and Discount Corporation. Doug Erdmier, a long-standing Board of Trade Member, has gained a trader's knowledge of the motivations of market players and uses this knowledge to develop trading tools that facilitate the analysis of market data.

 

DISCLAIMER:  Futures and options trading are speculative and involve risk of loss. The information displayed here is taken from sources believed to be reliable.  It is intended for information and education only and is not guaranteed by the CBOT as to accuracy, completeness, nor any trading result.   It is not intended as investment advice, nor does CBOT endorse or support any product or service represented in the presentation.  The views and opinions offered by individuals or their associated firms are solely those of the authors, and do not necessarily represent the views of the Chicago Board of Trade.  The Rules & Regulations of the CBOT remain the authoritative source on all current contract specifications & regulations.  "Dow Jones," "The Dow," "Dow Jones Industrial Average," and "DJIA" are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by the Board of Trade of the City of Chicago (CBOT). The CBOT's futures and futures-options contracts based on the Dow Jones Industrial Average are not sponsored, endorsed, sold, or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of trading in such products. Information provided is taken from sources believed to be reliable but is not guaranteed as to its accuracy or completeness. The Rules and Regulations of the Chicago Board of Trade should be consulted as the authoritative source for information, rules, and contract specifications.