VSA short note BY Ali Chowdhury

By Abdur Rahman on Saturday, February 16, 2013 at 3:05am

Courtesy: Our respected and Senior TA Dear ALi Chowdhury Vai

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 WITH A TRIBUTE TO-KARTHIK MARAR SIR- THE LEGEND OF STOCK

TRADING AND  INVESTMENT ANALYSIS - IN THE INDIAN SUB-CONTINENT –
I HAVE JUST  TRIED TO SYNTHESIZE  THIS SHORT NOTE  TAKING  HIS
GREAT VSA & VPA WRITE UP AS THE BASIS-MY SINCERE THANKS &
GRATITUDE ARE DUE TO HIM…!

VSA & VPA : Short note

Introduction: VSA & VPA measure the – Weakness in Uptrend and Strength in
Downtrend- in addition to it looks into the background of the market for weakness and
strength. Apart from this, each BAR could be characterized based on – Up Bar/Down
Bar- Volume –Spread-Close -  while VSA ignores  The Open.

Bar Positions- Identifications and Actions

Weakness in UPTREND

1.      UPTHRUST BAR:     Bar: Down BAR - Volume: High - Spread: Wide - Close:
Down

               Points to be noted and looked into while Upthrust Bar Appears in  an
-Uptrend

a)     It appears after series of Up bars in an uptrend and most probably at the resistance
level.

b) Volume: High Volume is an indication of weakness –the higher the Volume, the
stronger the weakness. If the Volume is ULTRA High – it is preferable to get out
immediately.

c)     Spread: The wider the spread more weakness is attached.

d) Close: The lower the close the stronger the weakness-if middle SM is not successful.

e)     New Territory: The high will be much higher than previous Bar-means-SM is
successful.
f) Upthrust is effective in the Uptrend.

    2.  PSUEDO: Bar: Down Bar–Vol: Low(comparatively lower than previous..)–

Spread:    Narrow/Avg/above Avg – Close: Down             

           Points to be noted and looked into -while the PSUEDO appears: ( SM have 2
choices here)

a)      1st choice of SM : Open with GAP UP- to show bullishness to discourage selling
by the small traders at the old resistance level-so, traders would hold for more gains. Just
see the background of the market whether sm are selling in the gap or not or absorbing
the quantity.

b)      2nd choice of SM: Open near previous price level, mark up the price rapidly means
SM are not bullish- they just want to see the market reaction at the resistance level and
decide their course of next action. If the volume is Medium or Medium to High but price
is not either making high or just equal to previous bar high or not much greater than
previous bar high -then they will start distributing. In both the cases – it is better to wait
and watch carefully.

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What to do when we come across –Upthrust and Psuedo Upthrust BAR-Next Bar is
very important:

a)      Bar: Down Bar - Volume: High – Spread: Wide – Close: Low = sign of clear
weakness and poses immediate bearish reversal.

b)      Bar: Down Bar – Vol: Low – Spread: Narrow – Close: UP=weakness is still in
question.
c)      Bar: Up Bar – Vol: High – Spread: Wide – Close: UP = the projected weakness is
negated.

3.      Encounter Bar:  Bar: Down Bar-Vol: High-Spread: Avg/Wide –Close: Low

When a stock has been moving up in an uptrend with high volume  and  encounters with
a down bar as mentioned above- it is  a sign of weakness in the stock. The volume should
not be very hig- just higher than the previous 2 Bars.

4.      No Demand Bar: Bar: Up Bar -Vol: Low- Spread: Narrow-Close : low/Middle
– KM

Points to be noted and looked into when “ No Demand Bar Appear”:

a)      SM is not active to support the price or on side line-buying and selling are of weak
hands.

b)      Look into the market background as this Bar does not suggest immediate reversal.

c)      If the weakness is shown in terms of “ Upthrust and Psuedo” - then weakness
confirmed.

d)      If the background does not show weakness then it is just due to lack of participation
of SM and  less trading activities- the SM might soon join in trading.

5.      Supply Bar: Bar: Up Bar-Vol: High-Spread: Narrow – Close: Low/Mid

a)      This normally appears at the Resistance level-means supply is more than demand.

b)      The next Bar should be watched carefully – whether supply is persisting or not. If
supply persists it reinforces the  weakness .

6.      Effort Without Result and Effort With Result: Next Bar is very Important:

Let us try to understand the – Effort Bars – First..!

            i. Effort to Rise Bar:  Bar: Up Bar-Vol: High/Mid-Spread:Avg/wide-Close: Up =

Bullish Sign
           ii. Effort to Fall Bar: Bar: Down Bar-Vol:Mid/Avg-Spread:Narrow/Avg –Close:
Down = Bearish sign

         Points to be noted and looked into after the appearance of Effort to Rise Bar:

a)      If the next Bar is an UP Bar and the market is moving up then the SM are
successful and achieved the desired result.

b)      If the next Bar is Down Bar with high Volume and Close Low-Means supply is
coming-the effort failed. These kinds of Bars are seen at the resistance level too.

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c)      When failed you would see -stock moving down or sideway and SM would wait for
supply to vanish. The SM will test the market again (Test for Supply  Bar would appear)
before repeating the attempt.  During this successful Repeated attempt-“AN  Entry is
Good Trade”..

STRENGTH IN DOWN TREND

1.               TEST FOR SUPPLY: BAR: UP/DOWN BAR-VOL:LOW-

SPREAD:NARROW/AVG-CLOSE: HIGH

             Points to be noted and looked into at the appearance of “TEST FOR
SUPPLY”Bar:

a)      In down Trend when SM accumulated large quantity, they are ready to move the
stock up again

Before moving up they test the market whether supply still exists.In uptrend, if the SM
encounter 

With supply the pause until the supply disappear- then they test again-if the supply is still
present
When they are sure that test is successful, then they take the process of moving the stock
up.

b)      The testing is done by- Rapidly Marking down the price, if the stock recovers
towards the high with Low volume then the test is successful. If Volume high stock
cannot recovers to the high –means supply is still present. Low volume and less trading
activities indicate – successful test

c)      Look into the market background, if there has been Absorption/Stopping Volume
before the test means – the strength of the Test Bar is significant.

2. Stopping /Absorption of Volume: Bar: Down Bar-Vol: High-Spread:Wide/Avg-

Close: Top/upper side

a) It is seen in the down trend at the bottom- the SM decided to stop the down tide and
start accumulating as a result you will see side way movement or go into long process of
accumulation. At the appearance of this bar – Bearish move is likely to end. Above all,
after the long down trend at the bottom the SM is absorbing the stock.

3.REVERSE UPTHRUST: BAR: UPBAR-VOL:HIGH-SPREAD:WIDE-CLOSE:

UP(NEAR HIGH)

It is rare and found at the bottom of the downtrend and exactly opposite to UPTHRUST
BAR.

4. UP BAR IN DOWN TREND: BAR:UP BAR-VOL:HIGH-SPREAD:WIDE-

CLOSE:HIGH

This can be seen anywhere in the down trend-it could appear before the temporary
bounce and retracement during down trend.

5. NO SUPPLY BAR: BAR:DOWN BAR-VOL:LOW-SPREAD:NARROW-

CLOSE:LOW (Lower Half)

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a) If no supply bar is found at the bottom then – it is strength. If it is found in the uptrend
then it means

Continuation of trend. It is also found in the consolidation zone.

b)A no supply bar has to be read in the context of market background, at the bottom they
indicate that supply is not available- then the SM ready to mark up.

c) A no supply bar really indicate strength if appear after or before – Test for supply bar.

SUPPORT AND RESISTANCE –VSA &VPA CONSIDER SUPPORT &

RESISTANCE AS ZONES:

1.RESISTANCE:

a) UP BAR-VOL:INCREASED-SPREAD:INCREASED-CLOSE:UP- Approaching the

resistance line means – Bullish sign.

b) DOWN BAR-VOL:DECREASED-SPREAD:NARROW-CLOSE: DOWN –

approaches the resistance line means – the stock would stall here.

c) A Resistance line/zone/area is crossed with high volume is Bullish. If the same is

crossed with low volume then it is bearish and caution is advised.

2. SUPPORT:

a) Vol: Decreased -Spread: Decreased-Close:LOW – stock reaches to support line means

that it might get support at support line and Reverse.

b)if support is broken with high volume it is sign of bearishness – on low volume support
breaking- selling a stock is a bad decision.

3.TRENDLINE : Low volume-spread narrow- the stock approaches the trend line,
means stock will be supported by the trend line. High vol-wide spread –close: low
approaches the trend line may break T/L.

4. RETRACEMENT & REVERSAL:

Retracement: 1. Lack of volatility 2. Small Spread 3. Decreased Volume.

Reversal : 1. Increased Volatility 2. Large Spread-especially effort to fall bar 3.increased

Volume

To define the “Retracement and Reversal” the simple way is to draw Arrow above the
stock movement and above the volume.

Retracement =  Arrow of stock and vol will be  in the same direction.

Reversal = Arrow of the stock and volume will be in the opposite direction.