Profile and Flow Series: Break From Balance

Alright everyone, so let's talk about a really popular setup that you're hopefully going to be able to take quite often. And through the use of something like a TPO chart, you'll get a more clear idea, clear understanding of what levels you should most specifically be paying attention to, versus just looking at something like a candlestick chart where this trade also is available as well. So what we're talking about is an inside day break from balance. So it's essentially two things in one and you can have these separately. But this is going to be the strongest case for this opportunity. So where we have an inside day, so we're looking at one day where the following day is completely inside the other day and we have mostly or almost all value overlap. Okay. Where we have a value area that is completely inside of the previous value area. And well, it's not necessarily value overlap, it's not like we have value slightly up or slightly low. This is almost entirely inside and we have a balanced structure forming. Okay. So you can have this break from balance and not have necessarily inside days or not necessarily have very tight value like we do in this case. So you can see that in the beginning of a range you could start it off with value more or less migrating, still stuck again within the confines of a range. So one of the most important things that we obviously have to do first is identify what kind of environment we're in so that we can identify what potential opportunities exist. So you know, are we in a ranging environment? Are we in a trending environment that's just beginning or potentially ending? You know, we know that up until this point this was after Bitcoin put in a fairly substantial move to the upside. You know, this was one of the first signs that looked like potential top was in. This is also one of the first areas where we began to have not only major kickback and major liquidation structure, which just shows that the market is sort of imbalanced, but also where we had weekly value migration. So weekly TPO charts moving up and then suddenly value beginning to shift to the downside. So we're looking for this ranging environment to begin at the outset of this. All right. What we're also going to see though is within this larger range we're going to have these micro ranges and these micro balance levels form. So come off of this low, impulsively market looks like it's trending. But again, in this case you have two back to back days that are quite far away from each other in terms of value. So the market is kind of Getting exhaustive and again imbalanced at this level, that is resistance. So we're looking for this area to act as resistance. Again, what we're going to be looking for ideally is signs of absorption overall at this high. So we're going to be looking for the signs of absorption at the high and as this structure progresses, look for a more fine tuned entry into any type of setup. Now there's a few different ways you could go about this because in this case you're going to see that towards the tail end of this setup we also get another trading opportunity that we share as well, which is the 80% rule, the Dalton rule, or as I have fine tune, the 76% rule. Okay, so market is looking like it is forming a balanced range. And the one thing that we're going to identify is that finally within this structure right here, we have that inside day setup. So we have one day and the following day is completely engulfed by the prior day. Not only that, we have our value area sitting within the prior value area. So focusing on the fact that volume and the TPO value area are pretty much one for one. So this is two back to back days. They're extremely tight. Value hasn't migrated upward or downward really at all. So this is where we're going to start to look for potential breakout opportunities. So with the day of the 19th, we actually close outside of value. So we close outside of value, which does open up the opportunity for a trade that is in a different trade module or trade video. And that is the 76% rule or the 80% rule, if you go by Jim Dalton's rule. So at the high of the structure, we know we're approaching resistance. So we'll look for signs of absorption. So this is the tail end, this is the 19th and the 20th. So just to reiterate, we're looking at the 19th as the inside day. So when we look at this structure immediately, what we see is that at the 19th, while price action in terms of a high and then the following high has not really done much. All right, we haven't put in a higher high, we see that CVD is making more of a concerted effort towards the upside. So we know we're at a contextual important level because we know that prior, that was the first turning point after a major leg up within market structure. We know that it was previously resistance on higher time frame market structure. And now we see that we have potential offside positioning. So this is not necessarily on its own. Some people will start getting into position Prematurely here. But what we're looking for is ultimately the break from balance. So you could say that potentially the break from balance could have occurred at the high. But what we know within the prior day is that we've already seen a rejection here on this tpo. So if we unfold this rejection here where the market was previously accepted in this high volume node, so we have more of an indication that the market is no longer really accepting business to the upside. We know that we have that delta divergence. So since we understand that most of this in this case after this day or what has transpired up to this period has shown signs of absorption at the high, we should be adding more weight to downside movement. Okay, so not Even mentioning the 80% rule setup, what we're looking for with a break from balance is a break and acceptance outside of the value area of this composited form. So these back to back days are ultimately the area that we're looking for the market to gain acceptance into. Now we could see that towards the low end of the structure, the market has rejected these lows pretty Cleanly on the 18th, comes back into this level, spends a little bit more time in them on the day of the 19th, but again, rejects from the high sooner. We know that the absorption is clear at the highs. So what we're looking to see is more than likely a weighted. We're adding weight to that potential downside move. So potentially gaining acceptance to the downside. So what we're going to do is form a composite. So our composite, the value area low right here, we're going to be looking for the market's response ideally through this level. So this is a setup where you are not really getting involved within the value area. You could start to look for acceptance pre break. But just remember that anytime that you're going to get involved before any type of even small sign such as a break or any kind of probe, you're taking a little bit more risk. What you still want to see at these lows is the same behavior. So just to go over this, we're looking at the overall environment, we see that the market is potentially beginning to form a larger range. We've seen major resistance towards the left side of this structure, meaning on the structure that was formed over here, we've seen up until this point there is quite a clear delta divergence. And now even though we haven't gone over this yet, we have a confluence of multiple setups. So multiple setups, meaning we have an inside day, we have inside value, and then we Have a Dalton's Rule setting up as well, knowing that the market has been a little bit more rejected at the high than at the low at all. Okay. So what we're looking for is potentially that break from balance. And if you understand the Dalton's Rule ready, you might be able to get a little bit earlier. But again, we're just treating this like this setup in isolation. So we have the inside day 76% rule and ideally one leading to the next in terms of a breakdown. So a balance range up to this point, a larger balance range over the last seven days, but in the last two days that we're paying attention to, it is the most balanced that has been. We had an inside day structure over here that occurred with a breakout earlier. So we could actually go over that one. But we're focusing on the end period. This is after the first correction. But again, it's the same exact play. In this case, there was absorption towards the downside and we ended up breaking back up towards the high. But in this case we have what we have a little bit more contextual risk reward because we're approaching a high that served as a previous higher time frame market structure resistance. So what took place down here is within the middle of a range. So this is sort of where your smaller traders get involved. You have much more certainty getting involved at a higher time frame structure. So towards the high, where you see absorption up here and you know that you're fading larger participants if you're trying to go against them, but you're working with that flow if you're taking that direction. Right. If you are fading rather where the absorption is occurring, which is in this case attempting to move upward. But we know that CVD is capturing all that action. We're showing that someone is capturing all of that action. So we have a few different things that we're paying attention to. The side that's obvious, CVD showing that there's clearly a divergence. Now we're going to be looking for the signs that you wouldn't normally see at a low. So if the market is balanced, so if the market had been bounced over this period, what do you normally see at the high? You see that buyers become more unwilling to buy at the high or buyers become more unwilling to bid. So you see aggression towards the high, but you don't see the bid walking up and towards the low. What should you see? You should see that sellers become less eager to sell passively down here. Right? This should all be absorbed by passive buyers, responsive buyers. So what you don't want to see at the low is that sellers become more interested in passively offering this low. Okay. What you'll normally see within this structure is that sellers within this will begin to sort of taper off their passive activity. As we approach the lows, it'll be more of an aggressive participant that is entering in into short positions rather than sellers actually offering passively. So we'll typically run into the passive buyer. Alright, so out of that low after that we'll normally see that in that case buyers will. And we'll just scroll back just to give you an idea of what we're looking at. So towards the low, what you don't want to see. Let's go into the 15 minute chart and we'll go into the center of the structure before we get to the point we're focusing on. Because now we have from this, we have our value area low of this composite. So that is right around 9550. Okay. So going back, what we're looking at is towards that low, okay. You'll see that towards the low there's less willingness to offer this. So we get down towards 9,600. You can really see that no one is really interested in offering this down there. Previous lows that we tested, there's not much offering at that low. Right. Market comes into this level, you get aggressive selling but rips right out of it. And we form the imbalances and are able to close above them. So there's less interest in offering this level. So what you're going to look for in any kind of break from balance is that something has changed in that regard. Okay. So less interest in offering even in the middle of this structure. So 9650. So for this period when the market actually breaks down. So what we have right here, and just to bring us up to speed is we have that value area low. So what we're paying attention to is a sign that the value area low is giving so a break from balance of this structure. So, so this is the day as it's transpired, the 80% rule, the 76% rule has taken place, but we haven't gone over that yet. And what we're looking at is acceptance and willingness by passive sellers to offer this. So again going to the notes, so sellers willing to offer at lower levels and then buyers who initially might be responsive not showing initiative to pull it out of this level. Okay, so you'll see that someone steps in down here initially to buy this, but then are they going to show initiative to pull it out of this level. The areas we're going to be defining our position around are the imbalances that occur into the low. Okay, so we're looking for imbalances into the low and that buyers and sellers are both taking place in two way activity, meaning that it is being offered and towards the break of this low. Initially, this is the drop, you see that price falls below fair value. So fair value in this case the moving average, that the, excuse me, the volume weighted average price. So this is where buyers and sellers put on risk over this day and if anything, if we're below it, it means that longs are more in trouble than shorts. If you just imagine there's a one for one in terms of participation at this level, if we're going to treat it as if it's neutral, which it wouldn't be, we can imagine that in any case, if you're below it, that shorts are in better position that they are in control. So we have the breakdown of the level and one of the first signs that we see is that yes, we do see buyers bid this up, but immediately at the low. What you should be paying attention to is that sellers are willing to open.