As for the identifying tops, just the opposite applies. YHOO has been moving higher on steady volume. Then it topped off with a higher volume than any recent days (bar with green arrow). So far it was a normal day. What is important was the following day (bar with blue arrow) where the high was higher than the previous bar, but it closed at the low end of the bar on higher volume than the previous day. This indicated there was more selling than buying. By seeing higher volume than the previous day, it shows the sentiment is changing, either by the smart money or participants who previously have not taken are now coming in to close their positions.



Figure 3

As for results in the following days show, although the volume subsided, the prices have already begun moving down. A test is normally used to find out if there is any more demand (or supply on downtrends). This is usually smart money (specialists or market makers) that will move the prices up to find out if more orders coming in to push it up further. When smart money move it near the highs and don’t see more orders (low volume), they usually enter in the opposite direction and push it down to get others to join in and push it even further.



Figure 4

The chart above shows the test (bar with red arrow). Prices were pushed back toward the high (green arrow) on low volume indicating there were no more buying orders coming in. This gave smart money the opportunity to push prices down without buying resistance. The next few bars show the snowball effect: by pushing prices down, they got the others to join in as well.

As the charts show, sometimes just by observing bar ranges and bar closes with volume can tell a lot what smart money is doing and not doing; all this without other indicators. Sometimes keeping it simple can bring a lot more value. With time and close observation, VSA can prove to be an invaluable method in tracking what the smart money is doing.



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