When we examined the forest tree-by-tree yesterday, it was evident risk appetite was strong. After two days of sustaining control in the marketplace, sellers were countered by aggressive buy flow Wednesday. The action started with a strong opening drive. All of my upside targets were met by 10:15 AM. It was at this point I hypothesized a trend day was setting up.
The trend context made sense at the time, but it also made it difficult for me to palate the sharp selling reversal. My thoughts became jumbled and I missed the opportunity to fade the second range extension on the day. The aggressive selling push was futile because we had already made range extension higher after a strong opening drive.
The very fact that we set such a wide initial balance higher, driven by the buyers was strong indication of their returning confidence and control. Taking the net sum of the market profile pieces, we can see the buyers gained almost complete control:
Our value area is overlapping/higher
Our close was higher
There is a large buying tail
The only piece missing is a migration of volume point of control higher. This point of contention is critical today. Will price revert back to value lower, or will value migrate higher with prices?
As of 8:15am, we are set to open outside of value on the upside. Overnight, buyers gained control after a balanced session of trade and the result was a higher distribution. This is a high risk environment where price can move beyond what we often consider normal. Therefore it is vital we have price levels in mind to guide our context.
I have highlighted key support zones on the following market profile chart: