Monday, September 21, 2009

Two Indications of Range Trading

We see range dynamics on the day timeframe when NYSE TICK (top chart) oscillates around the zero level, with the moving average (blue line) near zero. We also see range dynamics when the day's volume-weighted average price (VWAP; red line, bottom chart) is relatively flat and price oscillates around that price.

Sentiment on the day has leaned toward the sell side both in cumulative TICK and cumulative Delta, and we've been building volume at lower price levels relative to Friday. Recognizing the range dynamics of the trade, however, has been helpful in not chasing either strength or weakness on the day.