Profile and Flow Series: Auction, Absorption, and Exhaustion Intro

Alright everyone, so now on to the fun stuff. And I say fun stuff because what we did initially was get out of the way all of the things that are necessary to build a foundation. So the introductory material, sort of your 101 coursework when it comes to Market Profile and Order flow. And like any system or strategy or method in trading, it's going to come with its own unique vocabulary and jargon. And a lot of it in the beginning is going to sound really complex and confusing. But what you realize in any trading method is that it all just boils down to a few key things, right? Price, volume, time, momentum, absorption. Right? Buyers showing up more than sellers, sellers showing up more than buyers. It all boils down to a few really basic concepts. And there's just multiple ways that we could sort of filter this data and filter this information. And Market Profile, hopefully, if you know by now, rather hopefully you do know by now, just allows us to get some context. Okay? We can just very simply see if the market is in a balanced condition versus an imbalanced condition. We could see, you know, what levels have been respected greatly and what levels have allowed us to more or less kind of hover near. Right. Without showing a great deal of rejection. We could see when a, over a longer period of time that price has been really ranging and the value has been confined to a very small area versus maybe the overall level of dispersion within that range. Right. If you're just looking at high to low, you might not see that most of the time you've actually spent. If we're within a $300 range, most of our time was transacted in a $100 window within that range. So what we did was get out of the way all of the basic stuff. And now we're going to get into more of combining these features. And again, remember, Market profile is not a system, it's not a strategy, it's just a tool, just a way that we filter this information, we organize the data and order flow is just really showing us what's going on specifically between buyers and sellers at these levels that we are determining beforehand as being important levels or reaction zones or just areas of interest. Okay? We have many different names from them. By now you should know that there's a lot of different ways to label support and resistance. I might call it a key contextual level. If it makes a change in market structure or a reaction zone or a sticky point. If it's just a minor area that is likely to give us some level of friction, it's all the same concept though. These are sort of areas where price is having trouble with. Areas where we might expect price to turn. And when we're using market profile, we're hoping to organize the chart in a way that allows us to see these a little bit easier. And if we're using order flow, what we're doing is getting a more specific sort of, you know, as I always say, atomized idea of what's going down, or rather what's going. We're able to see what is going down at the atomized level. Okay. Now mind you, you could look at an order flow chart or footprint chart specifically and it could seem like a whole lot of noise. So you really don't know what you're looking for. Okay. What kind of patterns are you looking for? Because everything kind of boils down to patterns in the end. And it might not be a pattern in structure, but it's a pattern in behavior. So we're going to go over is these three concepts. Absorption, auction, exhaustion. Okay. Now absorption is what you're hopefully going to see at a support if you're looking to buy it. Okay. And it's also what you're hoping to see at a resistance if you're looking to sell it. Okay. So before we get into any of these, we're just going to go through these quickly and I'm going to explain each one of these and we're going to look at examples on the chart. We're going to be taking a look at three different charts. We're looking at the same area within time, but on three different charts. We're looking at this market profile series of four days. And as I have highlighted, this is actually a composite of the three day value. I put this blue box here so that we can see when I go to the other charts that we're still within this area. Because it's easy to get lost in Sierra charts. It doesn't scroll as easily. You know, I've griped about Sierra charts before, but it's a phenomenal platform. You can do the same thing on exocharts. So just so we know we're in the right area, we're not accidentally looking at different part of the chart. So this is the area we're focusing on. This is the footprint chart we're going to be looking at. And this is our candlestick chart with our cvd. And there's actually a vwap on here as well. So first things first. Absorption. Absorption is the type of behavior that we are going to be looking to see if we're playing a range. So if we are seeing that we have, let's say, a pretty balanced day right here. It's a normal variation. It's sort of balanced, but you can see there's a little bit of lopsidedness to it. Generally what we're looking for is, you know, just sign of balance. Okay, we have the value area right here. And let's say that we were anticipating that prices were going to continue to range sideways. We've sort of had this trending period upward, and prices have moved down slightly over time. But it appears to be that we're not really showing any kind of signs of impulsiveness. And the price might be setting up to range for a prolonged period of time. So what we would be looking to do is see absorption at the lows, at the highs. If we were looking to fade the moves through the value area low and value area high. So if you're trying to trade the value area around this range, what you're looking to do is enter in slightly below value and enter in slightly above value. So there's a misconception that you're looking to take the trade right off of this level. Now you're looking for, if you're a long within this range, you're looking for responsive buying activity. When price drops below, so responding, meaning that buyers are responding to this opportunity. And remember, time governs all opportunities. So we're looking for this to happen rather quickly. When price drops below value, we want to see response by buyers. So passive buyers in this case. And the same can be said at the high, but the inverse. So when price breaks above value, we want to see responsive activity by the sellers. They're responding to this opportunity to sell when price is above value.

This is responsive behavior. The market is buying below value, selling above value. What we want to see after this occurs, if we're seeing mean reversion take place as the responsive activity below value, and then as that shifts and reclaims this level, we want to see an initiative response. So what that means is you want to see. Let's just use the example of passive bidding down here. So buyers in this case bidding this area up, and then as price reclaims this range, you want to see an initiative response where we have aggressive buying come into the market. So, so imagine there is aggressive selling here. Initially, it brings it below value. On the other side of that, aggressive selling, there is passive buying. And then immediately what we see is a shift in activity where buyers become aggressive and they start aggressively buying. This, the opposite can Be set at the high. We see in this case responsive selling, which means that there is aggressive buying through this high. And then instead when price is unable to take that high and continue, we see an initiative selling. So we see market selling come in. So market selling, market buying. This is what causes these lower time frame momentum scalps and lower time frame order flow scalps to be set up rather to have follow through. So people are responding at the low, not everyone enters in, people are not quick to react. And then we have sort of this delayed momentum that occurs as people are aggressively lifting the offer or at the high as people are aggressively hitting into the bid. So it's an initiative response after a responsive response. I know that sounds funny, but it just is the way it is. So if we're looking to trade this range, what we want to see is signs of absorption. So sign of absorption is that one side of the market is able to deflect or hold back the other side's attempt to push price through new levels. So when we see that price and we're going to be paying attention rather to the following day, so remember we see that this day forms. So in reality we're actually looking at, you know, this is the day that actually transpired. But we're looking at taking advantage of this range after this day is closed out. And we're looking at the structure and presuming that we're going to be balanced. Okay, so you don't get the luxury of seeing into the future. So we have to just take what we have. We see balanced structures, two back to back, a move outside, but no really trending move whatsoever. Price closes above the point of control, closes at the point of control within this structure. So it looks pretty balanced. Again, it looks like price is just chopping, setting up for ranging behavior. So if you're looking to take this mean reverting trade, which in this case is not as attractive, and this period is actually just a $100 range, but still that is good enough to trade. If you're a scalper, what you're looking for is absorption at the high, absorption at the high, absorption at the low, whether or not you're taking a long or a short. Now everything we talk about right here is going to apply if we're trading a multi day composite. If we're trading a multi week compos composite, what we're looking for with absorption is that one side again is able to hold back the continued efforts by the other side. So when we're looking for absorption, we're not Looking for absorption at the high. If we're looking to get into a long, that might be one of the reasons why we don't get in a long. We're not looking at absorption at the low. If we're looking to get into a short, we're looking for absorption to get into the counter trend to that move. So countertrend, let's say that the local trend is on its way up. The counter trend for us would be taking the other side of this trade. We're anticipating that this is going to fail. So with absorption, what we're looking for, there's a few things we look for. One, we want to see that there is a reasonable amount of activity at these levels. So there's two way trades. So we want to look for volume. The other tool that is very useful is delta divergences. So for example, if we're looking at this structure as it's forming on this time frame, we could see that in the beginning of this structure, we are already setting up within this range with some delta divergences. So we have over here, the initial day into this low, which pretty much set up this balance range.

Began on rather a delta divergence. So we had a sign of absorption at this low. So now we have an area from that original day to pay attention to. This low down here is where buyers absorbed aggressive selling attempts. So aggressive selling through the level, unable to translate that into price movement, we have a higher low. So now we have an area that we should be looking for absorption moving forward. Remember, the value area in this case.

Is the general area. It's not a specific price point. So we know that this is where the absorption occurred. So now we could sort of zoom in right at this level. So we are seeing that buyers rather, or sellers rather, in this case, tried to aggressively move this lower but were unable to. So we're looking to take the other side of this trade because clearly the weakness is on part of the sellers and not on part of the buyers. In this case, the passive buyers were able to bid this attempt to move it lower up. Okay, so that's just the sign through the CVD divergence. So even without a delta chart or a CVD chart, you could use something like volume. So if we're looking at a volume chart, what you're looking for is changes in price structure relative to changes in volume. So the best way to actually do this is to draw this out. Let's say that we were coming into a resistance and we have multiple candles into this resistance. But towards the high of this resistance, we get smaller candles. So here is our structure. The trend is up now for the corresponding volume bars at the bottom. Let's say it looked something more like this. So we actually have an increase in volume. And this is sort of telling us the same thing. Okay. So this is telling us that for increased volume, increased activity, we've actually had less to show for it in terms of price action and range length. So we're looking at, in this case, candles that have no wicks. But what we're talking about is the actual range. So the range is being compressed. So this is just another tool that we can use. We could use volume. So volume bars with price action. And this gets right into the next one, which is price action. What kind of response are we seeing at these areas that we would determine? We're looking for absorption to begin with, we should see if it's at the lows that there is a good amount of shadow or wick below our close. What this indicates is that, yes, price was moved down, but it was able to close this entire structure back up more towards the high. The opposite can be said. Candles at resistance or at the top end of ranges, if we're looking for absorption at the high, is that it had a large range, but unfortunately, we were unable to close towards the high of that range. And most of the structure was at the low end of that candle. So you've seen this before. We have candles that look like this that are considered bullish at the bottom of moves. And you have the opposite type of candle that is more along the lines of this.

At the high. This is a hammer candle. And this is the type of price action that would be interpreted as potentially a sign of absorption. So the next thing that we're looking to see after absorption is, like I said, that initiative response. So absorption is basically responsive activity. So we see that price comes down below value. So now let's further this along, because, remember, this is the first day that occurred that created what we ended up following for this range. But now what we're looking for after that is the absorption at these lows. So you could see initially after this day and its first sign of absorption, there was more to follow. So you could see this structure right here, which is again, in that original area that we established, that first sign of absorption. You can see that across this structure right here. You have it again. So we have delta that has actually been trending downward. So more absorption at the lows. Okay. So we know at this low, there is responsive buying activity. There is Someone that's willing to bid this up. And for every attempt that is put forward to move price down, it's essentially stifled. So this is when we're going to start looking for a potential trade opportunity, not when we just see it. You know, you could take this trade, but you're taking it really out of thin air. You know, you're not seeing that much evidence. You had price just break down from here. You know, this might be the last, sort of the last stand before price continues down. And that's someone who's just passively bidding this up foolishly. You're not seeing that this is ultimately doing anything yet other than showing that someone is bidding this up. We don't have any kind of sign that it has occurred successfully that someone has left this area initiatively. So this is the area that we're going to return to and look to. And this is where we start to see more signs of absorption. Okay, now this is going to bring us down to the footprint. Alright, so within the footprint, within delta, within cvd, we get a really clear idea over a general area where this is occurring. So we see that over this general area we're having this more aggressive selling. That's not translating to any kind of further moves to the downside. Okay, so what we're going to do is go to the footprint now. So these are the structures we're focusing on again. And we're looking at right here after all of that delta divergence, we're looking at this right here. So we had divergence number one, the setup for divergence number two. And then what you want to see is sort of the same pattern that you'll look for within a swing failure where you break the level. Okay, so here we have a level that is pretty cleanly defined. And finally, after one of these scam wicks, one of these liquidation wicks, it looks like we're getting a clear break. We're breaking below microstructure. We're making an attempt at these lows again. So at these lows this is where we're going to focus on. So we'll go to that on the footprint chart. And this is the activity that we see. It's very one sided. So what you're looking for at a low and at a high, if you're looking for absorption is you're looking for one sided activity by the aggressor and you're looking for the passive absorption by the opposite side. So in this case we have aggressive selling at the low end of this candle. It's a 15 minute candle. So here's the candle right here. We'll change the ink actually. So it's a little bit more stands out a little bit more. Make this pink. So here's your candle. You have that final aggressive tempt into that low and you get a ton of volume at the bottom. So most importantly, it's not just that. As I said, we have a delta divergence. The delta divergence can occur in any kind of environment. It doesn't matter what type of volume. It could just be a slightly increased amount of volume and not translate to much action in price. But what we're looking at right here is in this aggressive move down, you can see that not only is the CVD moving down, we have a substantial increase in delta. So compared to previous, it's at least a multiple of two. And then in terms of volume, we're looking at 30 million contracts traded relative to the previous high, which was eight. And then going back, we're in more of the single digit territory. So this is one of the signs that you want to see is that six, someone has initially tried to push this through. This is sort of that last attempt. And we say that this portion of it not only is absorption, but it's also a sign of exhaustion by the other side. You have only aggressive activity below this low. And on the other side to follow, you could see that it is much thinner. Comparatively speaking, you're looking at just thousands of contracts traded versus millions. What the right side of this structure tells us is, is that no, not only did no one aggressively buy this yet, but that the bid didn't necessarily walk down as thick either, or, excuse me, the offer. So imagine that this is the order book and as price is coming down, there's really not many people that are willing to sell at these prices passively. So this is setting up for not only a shift from absorption to a sign of exhaustion because no one anymore at this point, or sellers at this point are kind of giving in and throwing in the towel. Because. Because remember, when we're looking at a market trading within a range and auctioning within a range, what we're looking for is the other side. We're looking to find buyers and sellers. And what we're talking about is passive buyers and sellers, for the most part, passive buyers and sellers into the level or at the level and then they initiate a response by the aggressive side out of it. Passive buyers and sellers, remember, sort of shape market structure. So think about them as the ones that shape market structure. The market orders, the Aggressive, they're the ones that take us from point A to point B. So what we see into this low is sort of this capitulatory volume. You get this massive spike in volume and then price maintains this level, closes above most of the volume and is able to auction sideways within that whole imbalance. So this is an imbalance right here, a ton of aggression into low. Remember, the passive seller does not really offer much down here. And then we're now maintaining this level and there's a slight change in participation. So now you see there's a slight increase in aggressive buying activity. So out of this low, after this major spike, there is an increase in delta. It's not just the fact that we have again, aggressive buyers, it's the fact that we have a positive delta within these candles overall. So where we've gone from slightly passive buying to more aggressive selling to more aggressive selling to now a big spike, it's suddenly beginning to shift. And this is after we had already seen multiple signs of absorption within the cvd. So now we have sort of this idea of where some trigger points are and we're clearly auctioning above them as long as we are above 9,250. So price makes one more stab into the low. Now you can see that clearly passive sellers have dried up. So we're looking at a few hundred thousand contracts over here to now, barely. We have sometimes, in some cases 500 contracts, 8,270 5,000. So the passive seller is not really interested in this anymore, in passively offering this. So what we're looking for is the two way trade to take place now. So we had two way trade rather and from the two way trade, the shift, okay, so where it becomes more one sided and where now the initiative response starts showing up. So we get some aggressive buying out of this level. We get some more aggressive buying and now we have some more of this two way activity. Overall though, the aggressive seller has kind of stepped off the throttle. You could see that there was a major spike down here and within this range. And we're looking at from 9270 to around 9250. So there's a $250 range that price is auctioning within. We don't really see signs of any kind of aggressive selling that's doing anything. So you get one more spurt of 1.2 million at just under 1.2 million contracts aggressively sold but are unable to move price down. And this is with respect to a candle that was prior and this is important, this is just a $1,000,000 candle, positive 700,000 Delta. The next candle that comes in with the negative delta is four times that volume, but unable to again move price in any way down. So we're seeing right now a passive response by buyers to step in front of this. Sellers no longer willing to sell passively at this level. And now an initiative response outside of this level. Now this is when you start to see buyers sort of catch on. So you'll start to see buying activity pick up. And then we get one of the first signs that we are going to be auctioning back to the top side of this range, which is a very, very initiative response by buyers. So into the low, you get these trapped sellers down here, slight flatlining of activity over here. All right? And then one of the signs is obviously that after we have this flat activity, that we have a major increase in buying activity outside of this level. All right? So the flat activity is useful because the flat activity over here, the flat activity that preceded this. So if we just go back a little bit. So the flat activity that preceded this over here, this creates a baseline. So we're looking at the volume for these levels. We're looking at the delta, and we're seeing that compared to that, that this is multiples of that value through the low. It should have been able to take price lower, but instead now we're just doing the same back over here. So clearly someone is bidding this up. And now we're looking to the opposite side of the range. So this is starting to show that buyers are getting more aggressive. Lifting out of this level, you have an imbalance price retests. Again, some more aggressive sellers come into the market. But again, look at the range of these structures. So we're looking at candle values that are on the 15 minute, just around 3 million and unable to move price more than in this case. We're looking at four ticks, right? Four ticks. But remember, if we're looking at ticks, it's based on your tick setting. We're really looking at price unable to move more than in this case, about 20, 20, $25. So aggressive selling comes in, not really doing much whatsoever. Now we're seeing that buyers are just in control, positive delta, positive delta, taking us out of this level. So this doesn't mean that we're on the up and up and we're going to just move on to new highs. This is just the other side of the market realizing that there's absorption at the low and that we're likely going to be Ranging. So it's this two way back and forth that creates these mean reversion opportunities. You're just going to see the same at the high again. The only sign that you have a change is when you have a major shift in the auction activity through the level.

This brings us to the idea of auction and two way trade at the high. You might be looking for the breakout. You saw aggressive buying activity come out of this level. We're still seeing buyers passively bid this up. On the way up, you see that there's aggressive selling coming into this market, but buyers are passively bidding this up. It's not like this is completely thinned out right towards the high. So comparatively speaking, you're looking at 4.5 million contracts, 2.46. You're still having passive buyers looking at the left hand side of the structure. So passive buyers willing to bid this up. But then you break this high and you can see how this changes drastically. Through this level you get a ton of aggressive buying activity and really it just thins out. Sort of like once this level was broken, this was the last area. This imbalance right here where buyers are willing to passively buy this with any size. Okay. Immediately you just go into sort of the few hundred thousand values level and we're looking at obviously a blow off candle. So when you have imbalances through a high like this, it's not the sign that the trend is changing and that we're breaking out of the range imbalances through the high without any kind of volume on the left hand side. And it's the opposite if we're looking at a move through the low is a sign of exhaustion. Right. What you want to see is that through this level, if this level is verified as being a new level that we're going to accept. And when I say verified, I just mean we're establishing that buyers and sellers are willing to do business here, do two way trade. We should see that the passive buyer steps up as well. Instead, what this is likely is a liquidation structure where you get a ton of these imbalances through the level shorts closing out. And the passive order book did not really follow this up necessarily with any size because no one was willing to bid this passively through this high. Until we see that someone is willing to bid this passively through this high.

There'S no real argument to be made for the potential that we're going to take it outside of this range. We're paying attention to now, the last level, the buyers are willing to really bid this up and that's our imbalance moving forward. What we want to see ultimately is that this is held. We're going to get into this in our further setup videos, but you would want to see that ultimately this is held, that this buyer is still willing to bid this level up instead. The following candle completely loses all of this aggressive buying activity. Whether or not this was liquidations or this was new orders to open, they're in trouble when you're below them, especially if you're below them. And, and we're starting to see that this is clearly absorbed because buyers are unable to move it higher. And now we're starting to see aggressive sellers start coming into the market. But it's good because we still have clearly a passive buyer. It doesn't mean that this has pulled us all the way down. We're respecting the top side of this range. But again our trigger until our trigger is blown through. So this last passive buyer through this level of size until that's blown through. And why we're not paying attention to this is because this is where we lose these levels. So this candle, you could say, oh, that's your passive buyer. But unfortunately we closed below them. So why do we look at something like this and say that that's a good sign and that that doesn't count? Well, we closed up here after that passive buyer got involved. After this passive buyer got involved, we closed down here. This one is in more pain than this one is because we're below him. So imagine you're in a position for a large amount of money. Just imagine you open a 2 million contract position. You, even though we know this footprint aggregates from a bunch of orders, imagine that and then the price has moved against you. You're going to be focusing on your entry point. So this is the last really large passive buyer through this level. If we don't see a really substantial close through this level and regain of this level, it's probably that we're going to come back down to the low side of the range. And if we don't see that activity, we'll start to see aggressive sellers start to come back in. So what we see is that price sort of respects this level for some time.

We just not sure how that happened. One sec.

Let's give it a moment. Okay, back to it. But again, really not much of an active response on part of buyers to pull this through. You're seeing again towards the high, unable to close up at the high. More passive buying though. But there's really no sign that we're closing towards the top end of the structure to show strength. So let's go back. Remember we're focusing on this area right here. I'll just put a line right there.

Okay. Extending forward. Respecting the line. Respecting the line. But unable to really do anything.

Sellers are able to push this back down. Okay. So we start to see aggressive selling come in. The thing about this structure is that ultimately buyers are in more control than sellers are. We're seeing that buyers are doing a better job than sellers are doing. Okay. Sellers are coming back into the market but having trouble moving this down to the other side of this range. Okay. Again, there's more signs of absorption. So we have sellers walk this back down to what ultimately within this structure is more along the lines of the point of control. So remember, this gray box is that value composite. And we're seeing, excuse me, that the aggressive selling is met by a passive buyer trapping at this low. Responsive activity out of here. Responsive and then initiative. Okay. Again, closing above that value. There's just more activity at the low end of the candle that's showing that buyers, passive buyers are still willing to bid this up. The first sign that we get of any kind of acceptance outside of this range shows up right here. Let's go over the difference as to why this is a sign of auction and acceptance compared to the previous. Again, we still get aggressive selling coming into these lows and mind you, at the same time, we're never just going to be scrolling along this chart. The way we're looking at it right here, we're looking at the fact that across this chart, all of this delta has indicated that buyers are willing to bid this up. Okay. What we see towards the left hand side of this structure or towards, excuse me, the right hand side of the structure is that there's still aggressive selling. But for this aggressive selling, we're not doing anything to take it back down to the low. Right. We're still having much more active buyers overwhelming any kind of aggressive selling that's coming into the market. It appears to be that there is one side that is in relative control. So focusing on this structure and how we resolve outside of the high, this is going to be the difference between exhaustion and auction. So a sign that there is a two way auction taking place rather than exhaustion or a blow off top. So exhaustion is a sign that one side of the market has given up. We get a blow off top. Usually there's a lack of two way trade. There's plenty of imbalances, but they're normally on one side of the market. And if it's at the case of the high, they're normally at the side of obviously the offer, there's more aggressive buyers. What we're looking for for exhaustion is the sign of single prints. So we'll go back here. It doesn't necessarily need to be, excuse me, single prints. But there's a lack of volume on the passive side. So we could see at these highs we get a good amount of volume initially, but the volume does not follow through. There is no more passive buyer that's willing to bid this up. It kind of drops off, especially in the beginning. You're going to get more of this. So going back to our first attempt at that high, so you get a strong close through. But there's not much of a passive buyer in this structure. Okay. Except for down here at this level, at this 9365 level, you know, you're looking at total imbalances on the right hand side of the structure, which is great to carry us through. But you want to see that the passive buyer is following this up because an active buyer in this case is not just going to lift us to new highs without the order book following this up. So remember, the order book has to follow price up. This has to go bid in order for it to stay strong. Imagine this as if it is a time when you're paying attention to price breaking through your level that you've established and the order book just isn't following you. And you know what that means. You know that it's likely not going to break out yet. You need to see the bid get stacked behind any kind of move through the level. Okay? We're still seeing that on the retest. Buyers are willing to bid this up, they're just not willing to carry it through yet. This is not sign of acceptance yet. Alright? So moving forward.

We'Re going to go to the sign of acceptance. Remember, if we're looking at a volume profile, we're looking for volume through the level. If we're looking at a volume histogram chart, we're looking at a ton of volume through the break. Now, two way activity is what we're looking for to see that this is actually validated and accepted as a new area that buyers and sellers are willing to do business. Okay? It's not one sided. This is the kind of breakout that you want to see when you look for imbalances. Imbalances at the end of a move through a level without the other side of the market are likely stops being run Liquidations. Okay, that exhaustive move, when we get the break right here, you could see that the passive buyer actually bids this up towards the high. Okay. So we get a ton of volume at the high. So we're paying attention to volume as well. We can't leave that out. So, 37 million contracts and the level of thickness up here shows that buyers are willing to bid this up continuously. So you get passive buyer up into the high. Passive buyer large. Passive buyer large. Passive buyer, 37 million contracts traded multiples in terms of delta through this level. And it's a big push through the level that we haven't had prior. Now most importantly on the attempt back. So in any kind of move back in this case, we get 3, 3 million contracts sold. But price is unable to from that point break lower at any point. So we're looking at right here the sign of a delta divergence right within the 15 minute chart. So you can see that these two back to back structures, we have 1.36 million contracts and then 2.4 million contracts and we have no move downward. So price is just continuously moving sideways within this range. So the sellers are really unable to, to do anything at this point. So instead what we're starting to see is the passive buyer shows up. Okay, passive buyer. The passive buyer, again you're looking for the large volume that's being willing or rather is willing to be bid up at these new levels. So exhaustion is when you have something like this. So when you have a candle structure like this.

And on the left hand side towards the high, through the high, you have low volume. So let's imagine these are zero prints and these are, you know, we're looking at 10, 10 10. Trying to draw these as best as possible with my line and square tool. So this would be a sign of exhaustion. Okay. The passive buyer was not willing to bid this up. Alright, what you're looking for through the level is not this. You're looking for something along the lines of this more of two way trade. Buyer and seller duking it out right here. Passive buyer willing to step this up. Okay. So without that it's more than likely exhaustion. And exhaustion is typically one of the signs you want to look for if you're going to be taking the other side of the trade. So we'll just scroll this forward and you'll see that the passive buyer is still within this trade. So we still have new levels being taken. Although this price is moving upward and we have this 15 minute candle close that's below most of this volume. We, we know that the passive buyer is willing to bid this up. So it's a sign that the order book, if you just want to consider the order book, is rising up with this structure and willing to bid upsize. So these three things are things that we're constantly going to be looking for and trying to use within all the strategies that we implement. That's all that it really comes down to. This is not some magic trading method. We finally get a blow off top over here. So here's your sign of exhaustion, right? This is the exhaustive period. Okay. So at this point we know that the last level is this imbalance. Okay? So this imbalance moving forward is going to be a very important level to overtake and will likely be a level that you'll see revisited. And in this case we actually overtook it because this has a big leg up. Apparently. This is an exhaustive move right here for sure. But this is an area, these, these levels. So they should in this case act as support or resistance. So we just blew through that, which doesn't really, doesn't really help us. But in this case is the area you come back and retest. So when you break through an imbalance like this and you just completely wipe it off the map, that's the area actually you would expect to act as a potential support. If we revisit it and if you just think about why this is, let's say that, let's just draw this out. Let's say that here is our imbalance. Imagine that this whole area is an imbalance. Price has moved up and you get a ton of two way activity. So we get a ton of buyers, a ton of sellers. Let's imagine, you know, 10, nine. This is a terrible drawing. I could just do this with the text. So let's say 100 and then 90 and this is a big imbalance within this structure. There's a larger candle through a level. Here's our level. Prices come up like that. Okay? Price broke back down. Now what you have right here is clearly this is a passive buyer, right? That's a passive buyer. Why would that act as resistance? Okay, so that passive buyer, that bid that up, if we close below that and we're approaching that, that buyer might want to get out of their position. Okay, they're getting back at break even right now. Now if we break through that level, not only is that a passive buyer, it's an active seller. So your aggressive seller. If this came into the market, we get an increase in open interest. We had a very large seller come in, if we're trading back above him, the same can be said return to that level that seller might want to get out of the market. So that's how it ends up creating these little support and resistances within these imbalances that you might not necessarily see unless you're looking at one of these broken down charts. So absorption is the sign that one side of the market is able to deflect or hold back the other sides of attempt. So we look for this before we're trying to get behind a move. We're looking for delta divergences, signs and increased volume for less translation and price action. We're looking for responsive action by price action followed by initiative response by buyers or sellers. So what this means is the responsiveness means that there is absorption. The initiative means that there's a response after to carry through exhaustion. It's when one side's given up. Look for those low values where the passive buyer or passive seller, even through a low, is unwilling to offer or bid. And then lastly the auction the two way, that kind of activity, that's what you want to see through a level. So you want to see that buyers and sellers are willing to follow passively through a level when a new level has been determined.