Order Flow: Equity Risk-Off

Last week, several catalysts pushed major equity markets down by the rise of risk aversion: the banking crisis in Portugal with Banco Espirito Santo, conflict in Gaza, and the Malaysian Airways jet that was shot down in Ukraine.

On Friday, European equity opened and remained negative all morning; only the American market managed to reverse the situation, refocusing investors on economic growth (Google’s results overcame analysts’ estimates) away from the crises in Ukraine and Middle East.

Over a weekend I usually study charts and flows in the market in order to set my plan up for following a chart. So I am about to show you some charts on DAX, German Equity Future.

Below you’ll find a long term chart of DAX as I study to find significant price levels, where huge orders were traded, and to know direction and the degree of market flows. Flows provided bullish signals since the yellow line crossed below zero four days ago, and now it is moving in to a positive field, even if the flow’s degree is not so significant.

As a result, we need to look at the market in the following trading sessions. Remember, political events can influence investors’ risk aversion and timing.

2014-07-19 10_39_56-FDAX 09-14 (4000 Volume) _ FDAX 09-14 (240 Min) 18_07_2014

Regarding levels, I suggest paying attention to 9597 (POC), 9657, 9695-9700, 9772 and 9950; at these levels, great amount of volumes were traded from the beginning of year.

On Friday, Dax opened negative making a significant low at 9653 (very close to one level expressed above) and then went up with help of American flows during the afternoon.

Looking at weekly Volume Profile, Dax didn’t manage to close above weekly POC, placed at 9745 price level, confirming the variable scenario. I want to underline two other important levels; 9791, upper band of Value Area and 9688, lower band of VA.

2014-07-19 10_52_27-Presentazione standard1 - Microsoft PowerPoint (Attivazione del prodotto non riu

Passing to daily VP, I want to emphasize the strong close on Friday, as price closed above its daily VP, placed at 9698. Thus, we may exploit 9715 (upper band) and 9698 (Friday’s POC) to enter long with a stop loss below 9680 (lower band). See the chart below:

2014-07-19 11_01_58-Presentazione standard1 - Microsoft PowerPoint (Attivazione del prodotto non riu

By the study of the volume area and chart, we can discover a very good trading idea, but this does involve some work. All trading ideas must be confirmed by flows during the trading session. What I need to emphasize is that significant levels can be broken if the flow pushes to do it. For this, I use order flow and volume tools to understand market dynamics that let me enter in the right market direction.

That’s all for today guys. Keep an eye out for my next few articles, where I am planning to analyse other futures and major forex couples. Be sure to stay tuned.

If you have any comments or requests, feel free to tweet me @LFXGabriele

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