Number crunching support and resistance with Insider Bars

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Every day, traders have to make big decisions about support and resistance. Should I deploy capital based on this high and low, or another? Which levels have real meaning, and which should be ignored?

Today we’re reviewing a product designed to help TradeStation users answer some of those questions: Insider Bars by OF-G.com. It’s one of the tools for sale in TradeStation’s TradingApp Store. Free trials are available.

Insider Bars analyzes order flow to determine what investors are doing at different prices. Upticks help find buying areas and down ticks detect selling pressure. The algorithm then crunches thousands of transactions to find to concentrations of activity, which are plotted with red and blue dots.

“It looks at every price point and micro-analyzes to see if bulls or bears are more in control,” creator Chris Cheatham said. “This lets you see the auction process as it actually occurs.”

Yesterday’s session provides an example of how the tool can be used on S&P 500 e-mini contracts (@ES). The first chart below has five-minute bars. It shows the index initially bouncing at 2691 before falling through it. Notice how the second time, there were only red dots near the low. That indicates bears were in control, according to Cheatham.

Inside Bars
Insider Bars showing S&P E-mini Futures (@ES), 5-minute interval. 4/19/18

His tool also draws light gray zones at the highs and lows of the previous regular session (9:30 a.m. ET and 4 p.m. ET). This is intended to hide potentially unimportant, low-volume price action that occurs overnight. Notice how that price area effectively served as resistance yesterday morning. (Top of chart.)

The Insider Bars work space also features a longer-term view with 30-minute bars. This chart shows the volume-weighted average price (VWAP) for both the current week and the previous week in orange. Traders can use it to find trend signals between sessions over the previous month. It also draws black lines for “value ranges,” areas where 70 percent of price action occurs. Then, each following week, the previous value ranges become horizontal dark gray price zones. Notice how one of those levels served as resistance on April 9.

“Thinking of the week as a session is a very powerful idea,” said Cheatham. “There is a natural periodicity in markets.”

The 30-minute chart below shows how some of these indicators help analyze price action in @ES.

Insider Bars showing S&P E-mini Futures (@ES), 30-minute interval. 4/19/18

This article is a series of posts about tools for sale in the TradingApp store.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.