Reading the Footprint: IB Reversal
Footie Focus
Each week I review key moments from recent price action in the indices. These instances will be analyzed using three methods: the tape / DOM; footprint; and candle chart. Synthesizing the three allows an understanding greater than the sum of its parts, leading to a complete understanding of the auction process. There are many great resources out there, although I am not aware of any that provide such a comprehensive study guide.
Image 1. Clown Cash - buying the highs
Reading the Footprint
In this series we’ll scrutinize the footprint charts, or key moments in the day where price reversed direction. These are intended to act as flashcards; something you could print and have nearby.
In the following footprint examples, keep in mind the three principles of absorption, exhaustion, and counter-initiation. I generally assign the following levels of risk necessary to trade each one: medium, low, and high.
Often absorption may not have a clear reference above or below, or older prices from a previous session. It’s all relative. But ultimately there are many examples of large players breaking through an area of resistance. Passive sellers / buyers simply were not in sufficient quantity to hold back prices.
I tend to focus my entries on exhaustion prints, in footprints, the tape, and even candles charts. Let’s see what that looks like below.
September 5, Selling the NFP
The NFP but the market came in bid at the open. This wasn’t exactly surprising, news has not had an effect on slowing upside momentum.
But perhaps the first move wasn’t the real one. There were some pretty obvious clues in the footprint…