Last Low Volume Node Ahead
This article will analyze and describe the importance of high and low volume nodes as well as their relevance to Bitcoin’s market. It indicates where the final volume trough is and where the final ‘fill’ area to establish the low.
5% drop during New York lunch hour
Volume during Thursday’s trade has been down compared to the past 14 trade days. The drop that occurred shortly after the New York lunch hour found a sizeable increase during the intraday trade, which yielded a sharp 5% drop over a one and a half hour period. The biggest spikes down occurred on high volume, indicating a single entity pressuring the aggregate market lower. It Is entirely possible that traders are looking to break the current support level being found on the market profile – which would push price into the next support zone found using Volume-At-Price analysis.
Volume-At-Price Analysis (VAP, also called volume-by-price or market profile) differs from regular volume analysis. Regular volume analysis shows the amount of volume traded at a specific time frame. Volume-At-Price analysis shows the volume that was traded at a particular price range. Support and resistance levels are identified by locating high volume nodes (labeled A) and low volume nodes (labeled B). These are important levels and areas to observe because of how price behaves as it moves above and below these levels. Think of high volume nodes as areas of strong support and resistance, this is where prices are being accumulated and/or distributed. Low volume nodes are the key zones to identify though. Low volume nodes at as a sort of ‘vacuum’ when price enters that range – price gets ‘sucked’ in because there has been little to no participation and the presence of stop or limit orders have not existed.
The charts above represent a time period from January of 2017 to the present. Notice that the highest volume node here is above the current price action at 6300. This is where price has traded the most for the past two years. We can also observe where the most recent drop in Bitcoin happened in November. Price fell below the support level of that high volume node and when it finally entered the low volume node near 5000, it just accelerated through it. There has been accumulation here between 4500 and 3300, which could be a base forming. However, there is another low volume node between 3300 and 2800, with 2800 being the bottom of that low volume node. It seems very reasonable that 2800 is the next zone to search out. It should be noted that low volume zones are similar to ‘gaps’ that we observe in regular equity markets and the futures markets. They are similar in that there is a tendency to ‘fill’ in those zones instead of leaving them open. Many analysts feel that ‘gap fills’ are a necessary component to provide honest price history. If true, then we are near the very last low volume node for Bitcoin.