_TradeVulture

Using comparative analysis to understand PA (corrected)

FX:EURUSD   Euro Fx/U.S. Dollar
75 0 3
Distribution patterns happen because on the lower timeframe, you have declining bullish momentum . In the higher timeframe, it has not experienced this decline of bullish momentum , because it was heavily bullish , and so as the shorter timeframe continues to lose bullish momentum , the higher timeframe's bullishness pushes the price higher and you get negative divergence in the shorter timeframe. The shorter timeframe maintains its decline in bullish momentum , finally causing the higher timeframe to weaken.

In the 2hr             time frame (left), price begins a distribution (ascending triangle). This happens as momentum is shifting, as weekly support lost (resistance) levels are tagged for the first time. The weekly chart (right) is not setup to rip higher yet, as downward momentum must first be offset. Zoom out and you can see the huge leg down.

Momentum moves when you finally have all your timeframes working in the same direction. When the offsetting of the bullish and or bearish volume surpasses the other. This is true in all timeframes. Why do the longer timeframes have to participate? Because the longer timeframes are the truer representation of the market status.

Putting it all together:

The longer term trend rules.
The shorter term trend can show you the trend changes early.
If the shorter term trend is sustained and strengthens, it will affect the longer term trend.
Complex chart patterns form due to the offsetting of bullish and bearish volumes between short and long term timeframes.
When timeframes are inline with each other in direction, you get moderate-strong moves
News happens, but release is usually late - reaction to news is set up prior to release. The release of news accelerates the outcome.
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