Break out of balance ..
That is the story that we have to listen to today. We broke a 5 day balance opening with a gap above balance high. When we face a gap three possible scenarios come immediately to mind.
- We open and go immediately in the direction of the gap
- we open fill the gap and go to the direction of the gap
- we open fill the gap and reenter previous range.
Breaking a balance is even stronger as possible longer term inventory could be in danger and caught on the wrong side of the market.
Today scenario one happened. Overnight and short term inventory was long but the market went right away in the direction of the gap putting pressure on the longer term inventory. Look at the picture on the right how this short inventory covered on the open with the P formation from the Pro Suite Dalton template volume profile. The market continued its march higher on B-C-D-E and F period.
Pro Suite signaled weak buying at the low of B C ( shown on the bottom image) E and F period and POC started to be prominent at F period. Only starting with F period looking for shorts made sense.
Because market was finding some value only from that period on. At F we had 4 TPOs across out of 6 periods. It does not mean to sell but it just means that the market is slowing and could reverse. The breakout of G period low was a good signal that market could be too long on the short term time frame.