Thrust Pullback And Measuring Move Analysis in Trading

This article delves into the comprehensive explanation of Thrust Pullback and Measuring Move Analysis. It references a previous article that covered Advanced Price Action Analysis. The main focus of this piece is to elaborate on the following aspects related to Thrust Pullback and Measuring Move Analysis:

1. Thrust and Pullback Analysis: Examining the dynamics of market movements, where thrust represents the forceful direction of a trend, and pullback refers to the retracement or temporary reversal.

2. Measuring Move: Understanding how to gauge the potential extent of a price movement based on specific price patterns and market behavior.

3. Volume and Price Analysis: Analyzing both volume and price data to gain insights into market trends and possible price movements.

4. Thrust, Pullback, and Measuring Move Analysis: Integrating the concepts of thrust, pullback, and measuring move to assess the strength or weakness of a trend.

By studying these aspects, one can discern the shifts in market trends and evaluate the significance of potential price movements.

Thrust Analysis 

THRUST Analysis involves examining the distance between the current swing high and a previous swing high in an uptrend or swing low in a downtrend. When this distance increases, it indicates potential strength in the trend. On the other hand, if the thrust shortens, it signals possible weakness in the trend. In essence, thrust analysis helps to gauge the momentum and sustainability of a trend based on the magnitude of price movements between consecutive swing highs and lows.

The greater thrust of T2 compared to T1 suggests a higher level of strength within the trend. Furthermore, when comparing T2 to T3, the upward movement shows additional strength on the upside. In summary, the increased thrust between these different points highlights the growing momentum and power of the trend as it progresses.

The shortening of thrust between T2 and T1 signifies weakness within the trend. Additionally, T3 being even shorter than T2 indicates the development of further weakness in the trend. Comparing T2 to T1, T2 fails to project to the same distance as T1 did.

This shift indicates a change in the balance between supply and demand in the market. The inability to match the previous distance suggests a decrease in bullish pressure and/or an increase in bearish pressure, leading to a potential reversal or a weakening of the existing trend.

The uptrend is showing signs of weakening

ALL REVERSE FOR DOWNTREND

DEPTH OF PULLBACK

The term "DEPTH OF Pullback" pertains to the extent to which a price retraces or moves back from its previous upward movement or impulse move. In other words, it measures the distance covered by the price in the opposite direction of the initial upward thrust before the trend potentially resumes or changes its direction again. The depth of the pullback provides valuable insights into the strength and sustainability of the prevailing trend.

When the depth of a pullback increases, it indicates potential weakness within the current trend. A deeper retracement suggests that the price is moving farther away from its previous upward movement, which might signal a weakening trend. On the other hand, if the depth of the pullback decreases, it signifies potential strength within the trend. A shallower retracement suggests that the price is holding relatively close to its previous upward movement, indicating a resilient and strong trend. By observing changes in the depth of pullbacks, traders can gain insights into the underlying strength or weakness of the market trend.

PULLBACK DP1 represents the distance by which the price retraces the initial impulse move IM1. Similarly, DP2 is the depth of the retracement relative to the impulse move IM2, while DP3 is the depth concerning the impulse move IM3.

It's essential to note that DP2 is a significantly smaller percentage of its corresponding IMPULSE MOVE IM2 compared to DP1's relationship with IM1. This indicates that the pullback represented by DP2 has a smaller depth compared to the previous one represented by DP1.

This pattern suggests a potential weakening of the bearish pressure, resulting in increased strength within the price trend. The smaller retracement in DP2 implies that buyers are exhibiting more resilience and are preventing the price from retracing as deeply as before, which could signal a strengthening uptrend.

Please take note that DP4 shows a considerable increase in size compared to DP3, suggesting potential strength within the bears. Consequently, this could lead to potential weakness within the price trend. The greater depth of pullback represented by DP3 indicates a rise in bearish pressure and the possibility of a weakening trend. The larger retracement implies that sellers are exerting more force in pulling the price back, which might lead to a potential shift in the trend direction or a potential downtrend.

The same concept applies to the downtrend.

MEASURING MOVE (relative strength of move)

To assess the strength of a trend, one can compare the current impulse swing with the previous impulse swing in the same direction. By doing so, you can determine whether the strength of the trend is increasing, decreasing, or remaining relatively equal.

This analysis helps traders and analysts to gauge the momentum and potential sustainability of the ongoing trend. If the current impulse swing is stronger than the previous one, it indicates an increase in trend strength. Conversely, a weaker current impulse swing suggests a potential decrease in trend strength. If both impulse swings are relatively similar, it may signify a stable or neutral trend strength.

Volume and Price Analysis

Before proceeding further, it's important to understand some key terms:

Swing: A swing refers to a significant high or low point on a price chart where the direction of the price movement changes. It marks the end of a previous trend and the beginning of a new one.

Leg: A leg represents the distance between two consecutive swing points on a price chart. It measures the price movement from one swing high or low to the next one, providing insight into the magnitude of price changes during that specific interval.

Here are the general rules for interpreting volume to determine the health of a trend:

1. When the price is rising, and volume is rising, it indicates a STRONGLY BULLISH market. In this scenario, the uptrend is considered robust and healthy as volume increases alongside the price, and there are fewer sellers willing to sell at lower prices during correction periods.

2. If the price is rising, but volume is falling, it suggests a WEAKLY BULLISH market. When prices continue to rise, but the volume decreases, it indicates a potential weakening of the trend. The uptrend might slow down, and once sellers become more active (usually indicated by increased volume during a downward move), prices are likely to fall.

3. When the price is falling, and volume is rising, it signifies a STRONGLY BEARISH market. In this situation, the downtrend is strong and robust as both price and volume move in the same direction, indicating a significant selling pressure in the market.

4. If the price is falling, and volume is falling, it denotes a WEAKLY BEARISH market. A weakening downtrend is indicated when prices decline, but the volume diminishes. This might signal that the selling pressure is subsiding, and the market could potentially experience a reversal or a period of consolidation.

Volume strength and weakness analysis

Volume analysis involves comparing the volume of the current price swing with the volume of previous price swings or legs. The purpose of this analysis is to identify any increases or decreases in volume compared to those previous swings, which can provide insights into the strength of the trend.

1) To analyze volume, we compare the volume of the current price swing with the volume of the preceding price swing in the same direction. This comparison helps us determine whether there is an increase or decrease in volume, which in turn reveals the potential strength or weakness of the ongoing trend.

2) Additionally, we can compare the volume of the current price swing with the volume of the previous price swing in the opposite direction. This comparison allows us to gauge any significant shifts in volume and understand how market participants are reacting to price movements. By examining volume changes in this manner, traders can gain valuable information about market sentiment and potential trend reversals.

When comparing the volume of the current price swing with the volume of the previous price swing in the same direction, we are essentially looking at the relationship between the current impulse swing and the preceding one. The purpose of this comparison is to determine whether the volume is increasing, decreasing, or remains the same.

If the volume of the current price swing is higher than that of the previous price swing in the same direction, it indicates an increase in volume. This suggests potential strength within the ongoing trend, as more market participants are actively participating in the price movement.

Conversely, if the volume of the current price swing is lower than that of the previous price swing in the same direction, it suggests a decrease in volume. This may signal a potential weakening of the trend, as there is less participation or interest from traders in the current price movement.

Lastly, if the volume of the current price swing is approximately the same as that of the previous price swing in the same direction, it signifies a relatively stable volume. This could imply a continuation of the current trend without significant changes in market participation.

In the left-side image (Image 1), we observe two up-swings (A and B). Comparing the volume of these two swings, we notice that the volume of the leg B is decreased, indicating a reduction in bullish volume. This reduction suggests weakness on the bullish side. When the current up leg B's volume is compared to the previous up leg A's volume and it shows a decrease, it implies that the trend is unlikely to continue. Prices may still attempt to rise, but at a slower pace. However, once sellers take control (usually indicated by an increase in volume during a downward move), prices are likely to fall.

On the right-side image (Image 2), when comparing the volume of the current up leg B with the previous up leg A, we notice increasing volume on the A legs. This indicates a rise in bullish strength, and the bullish price swings are displaying signs of strength.

It's important to note that all these concepts are reversed for a downtrend. In a downtrend, increasing volume during down legs suggests strengthening bearish pressure, while decreasing volume during down legs indicates potential weakness in the downtrend.

When comparing the volume of the current price swing with the volume of the previous price swing in the opposite direction, we're essentially looking at the impulse volume versus the retrace volume. In a healthy trend, we typically observe increasing volume during the impulse move and decreasing volume during the retracement. This pattern indicates a robust and sustainable trend with strong momentum during upward movements and temporary pauses or corrections during retracements.

In the left-side image (Image 1), when comparing the volume of the current up leg B with the previous up leg A, we observe a decrease in volume. This indicates that the strength has shifted to the bearish side. When prices are rising, but volume is decreasing, it suggests that the trend is unlikely to continue. Prices may still rise, but at a slower pace. Once sellers take control, typically signified by an increase in volume during a downward move, prices are expected to fall.

On the right-side image (Image 2), when comparing the volume of the current up leg B with the previous up leg A, we observe that both the price and volume are rising. This implies that bullish pressure has overcome bearish pressure, and the trend is expected to continue in the upward direction.

In the upcoming article, I will delve into the topic of "How to Trade with Genius Investors." Within that article, I will focus on explaining the concepts of Thrust Pullback and Measuring Move Analysis in trading. I hope you find this Thrust Pullback and Measuring Move Analysis article informative and enjoyable to read. Stay tuned for more insights and strategies on trading with smart money.

⬅️ Previous Course

Advanced Price Action Analysis In Trading

Next Course ➡️

Trading With Genius Investors