2005issue C061-4
Decaying volume bands as leftover auction inventory
A decaying volume-at-price grid stores each session's trade in price boxes and fades older stores so recent activity dominates. This article shows how that map was built and read on three named stocks, then adds an editorial rule: treat a still-hot band as leftover auction inventory and grade every revisit as absorb, reject, or ride-through before calling a breakout or a support hold.
- Lay a fixed price grid over each session and spread that session's volume evenly across the occupied boxes, then carry older stores forward under time decay.
- Read working support and resistance from still-hot high-activity bands on the grid instead of sketching those levels by hand.
- A relative color scale ranks cells only inside the current window, and an even time axis keeps the map aligned with ordinary indicators.
- Editorial step: when price returns to leftover auction inventory, grade the visit as absorb, reject, or ride-through before calling a breakout or a support hold.
How the volume-at-price grid is built
A decaying volume-at-price chart is built by laying a fixed price grid over each session's high-low range and spreading that session's total volume evenly across the occupied boxes. Volume already stored in a box is carried into later sessions while its weight is reduced as days pass, and those decayed amounts are summed with new allocations.
The historical workflow assigns end-of-day volume evenly across the day's price boxes. Five- or 15-minute bars are proposed for a tighter allocation. Box height and the decay rule are the two main settings.
Colors, time, and leftover levels
Colors rank each box from empty to the largest accumulation inside that chart's own window. A cell that is hottest on a three-month view can appear cooler on a two-year view that includes larger later buildups. That ranking is a relative color scale, not a fixed volume unit.
The horizontal axis stays on even calendar time rather than stretching days by volume. The even time axis lets the map sit beside ordinary indicators and oscillators.
Prices that still hold a large store of recent volume are treated as the working support and resistance locations. Those levels are read from the grid instead of sketched by hand.
Three historical sequences
On a Texas Instruments example running from March 2003 to February 2005, high-activity bands are marked as visible a few days before labeled breakouts and breakdowns.
In a Lucent Technologies close-up from September 2004 to February 2005, a later advance is called constructive because price cleared a fresh high-activity band without stalling and then climbed while sitting on a warm volume shelf. During that Lucent decline, a new mid-move high-activity pocket is read as fresh supply that later capped a bounce and as an early sign that selling was gaining weight.
In a Pfizer sequence from October 2003 to February 2005, successively lower bounces under a persistent high-activity ceiling, followed by heavier volume on the down-leg, are used to expect a break of nearby support.
Editorial reading: the Texas Instruments bands sit in the path of later labeled breaks as leftover inventory. The Lucent advance is graded as absorption, then a ride-through on a warm shelf. The Lucent mid-move pocket is graded as fresh supply that later rejected a bounce. The Pfizer sequence is graded as repeated rejection under a ceiling, after which the historical workflow looks for nearby support to give way rather than treating it as a hold.
All readings on this track · 8 readings
- 2005Decaying volume bands as leftover auction inventory
- 2008Constructing equal-volume and open-interest auction zones
- 2010Constructing daily volume-profile breakout levels
- 2010Building volume profile maps for support and resistance
- 2015SPY volume profile as a support and breakout map
- 2016A three-layer sector map around a policy-meeting week
- 2017A three-part liquidity screen before a futures idea is executable
- 2020A two-gate liquidity filter before futures order selection