When we look at price we look for areas of liquidity and possible levels to act as S&R. Not some randomly selected S&R level like the retail horizontals or diagonals.
The image above shows 4 different NWOGs. We can see how price gravitates towards them. It may pass through them like knife through butter. Or it could consolidate around them and then expand to the next one. Just like the Draw on liquidity will act as a magnet for price, NWOG’s have the same effect.
Opening prices are not random price events. Proof of that is how price respects those levels throughout the week and in the future as well. Weekly open price is used during the week for PO3. But the entirety of the NWOG will be projected in the future for many weeks.
Closing prices are also not random. Now let’s use the closing price on 3rd March and Opening on 5th March to get our NWOG.
We need 2 passes through the NWOG.
Here we have Buyside delivered first and the we had Sellside delivered.
Here we can see how the NWOG act as magnets and price shows willingness to go right back into them and its a fair value function in price delivery. The Gap is not a random event. It’s engineered, it’s designed. Smart Money uses these old reference points in the future weeks and months.
How can we find a way to predict trending/consolidating markets?
Look at the right of the image above. That is the Tuesday of that particulate week. Whenever there is a sudden move away from the NWOG, that indicates that we are entering a trending market.
