Vwap at Close as key Area to watch next day

Updated

This 30 min chart provides a very clear example of why the closing VWAP price is well worth putting up on today's chart. Also, in this example, the level from the day before is also shown. The market today made a very fast rebound from new move lows to get back up to those levels before selling off slightly before the close.

Also note that these two previous Close Vwap prices (magenta horizontal lines drawn from the closing Vwap prices) came close to the dynamic POC (Point of Control), which on this chart is the thin red dashed line. (The thick red line is the Dynamic POC for the entire chart, whereas the thin line is for this session only. The thick one changes depending on what you have displayed. I sometimes like to have a 30 min chart show today + yesterday, or today + rest of the week to compare with the current situation.

In today's example you can see that the thick line is down where the Vwap Close price for today is, making it that much more likely that the market will test that level on any pullback. It will also make an excellent level to put in a Limit Buy order in the expectation of a quick reflexive bounce back up. In ES terms I would expect at least a 2 point bounce but with this level of volatility probably more like 5-10 points, probably within 5 minutes. We will see tomorrow - or whenever that level is hit again once there is a pullback. Given the Ichimoku Clouds are heading down and price is well below, even after this dramatic bounce up, chances are very high that this level will be tested tomorrow. Shorting the market from where it has closed with an expectation of such a test is a fairly high percentage bet, albeit with current volatility, who knows what will happen. If the market does keep zooming up on the open, I expect it to zoom back down again to that closing Vwap level in short order. During high volatility situations there are usually huge moves up and down until the options situation calms down and a new bottom or top gradually becomes apparent - usually a 2-6 week process.)

Now also marked is today's closing VWAP price. If there is a selloff tomorrow, expect the market to test that level.

I have marked this 'beyond technical analysis' simply because VWAP, though a technical indicator, is derived from very different criteria that are 98% based on price action alone (moving averages, oscillators etc.), nor is it a 'chart pattern' per se.

I have seen these levels tested hundreds of times, sometimes days or weeks later if there is a strong move and now there is a correction underway back to previous levels. I find that the VWAP, along with the dynamic Point of Control in the Volume Profile (premium) indicator all I need to ascertain likely support-resistance levels.

Note

A little more...

The red arrows show how support-resistance identified by the POC or Vwap proved helpful.

The first red arrow pair played out in 15 minutes.
The second in ten.
In every case the levels were touched briefly and then prices bounced.
They make very good low-risk entry points.
If wrong, just scale in further as price goes against the position and nearly always price will retrace to initial entry point, making that one break-even and the additional scale-ins profitable.

The blue arrows show a few points where the Clouds were helpful.
And the green arrows show where the Vwap was helpful.

Note

PS Pay attention when Vwap and Clouds are together. Often a move develops from that level.

Trade closed: target reached

Well, this is 2 days later. The first lower level highlighted in the first chart has not yet been hit since the market traded up to around .382 retracement of last week's large down move. But today the market has traded back (violently) to the prior Close Vwap level which was key before.

Note

That level hit this morning was also briefly touched yesterday (making the day's low).

Both of these are good, recent examples of why paying attention to the closing vwap price can be a good idea.

And if the market trades down again, expect that original lower level to be probed, usually good for a quick scalp 'bounce' trade, and then it will remain to be seen if it gets well and truly penetrated to the downside. (2587 level)

Note

Upside previous Vwap Close Target if keeps ascending is around 2696...

Trade closed: target reached

2696 hit in 5 of the last 6 30-min bars.

Expect correction back to Closing Vwap at 2676 (either during initial leg(s) down, or once correction begins if this up-move continues.

If continues, around 2785 is next main prior Vwap Close from Feb 2nd:

Note

I just noticed another level at 2707 from 2/05 which is now marked, but it's very close to current level so not all that interesting. Still, it could end up being around the top end of current rally. That said, I usually take these lines off once they have been corrected to, and you can see that on the 7th it ralled up to that level (and a little higher), so in my book that level is now done with. The 2785 level, however, higher up, has not yet been corrected back to.

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Feb 21. Sell-off into close. Old vwap close never yet corrected to down below at 2672 level....

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PS The orange, green and blue horizontal lines are the 38-50-61.8 retracement levels from the all-time high to the low of the sell-off. Because the old Vwap close level is above the old 38 level, I expect it at least to be probed before a resumption of the rally, or of course if market is going down to test that old low to make a Daily or Weekly double bottom, then this area is the first real pit-stop on the way down...

Note

From Feb 14 above: 2785 hit yesterday and exceeded by one point, then again today and exceeded by only 4.75 points and within an hour started sharp sell-off down to 2747, 40 points lower.

Again, this shows how paying attention to these levels is worth the effort.

Note

(Daily)

(30 min)

This chart meant for previous comment. Also shows next level down, which is 2728.50
However, I added in a longer-term Volume Profile which shows a POC below the next Closing Vwap (2717) between which is a 61.8% retracement level of the recent upswing from the Feb sell-off double bottom low.

The 50% retracement is at 2736 which is just above the 2828.50 Closing Vwap magnet, so I expect the market to at least get to the 50% level. Unless determined buying comes in there, it will probably at least touch the old Vwap before rebounding and if it goes through there convincingly, chances are that the old bottom will be tested and will fail. I have many more closing vwaps below because of the rocket-like rise of the market since Trump's election, so a protracted, deep correction, even short bear market, is not out of the question here.

And THAT said, because of the recent all-time highs, it is HIGHLY unlikely that the market will just collapse from here without first a retest of those highs, making a double top (or close). OR, if it does crash from here, then expect a rapid rebound as part of establishing an intermediate term (Daily / Weekly Charts) trading range which will probably last for next few years.

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Addendum to last: Given this current rebound has hit the upside closing vwap target which itself was ABOVE the 61.8% retracement, this is essentially bullish and I expect the market to work its way up to the old highs again fairly soon.

The new closing vwap target above (from today's close) is 2766.50, the highest one on record. After that we have to go back to the old high levels and the only not-yet tested closing vwap up there is at 2862.50 from the 01/29 close.

We'll soon see how things play out, but the Daily chart - esp the Ichi bullish Cloud, is looking like another leg up is in the cards, after which we probably THEN get the Trading range.

Note

Re: "However, I added in a longer-term Volume Profile which shows a POC below the next Closing Vwap (2717) between which is a 61.8% retracement level of the recent upswing from the Feb sell-off double bottom low. "

2717 hit during sharp sell-off into the close of the day-session on 75%+ percentile volume. Given this is the POC for a 2-3 week period, there is a good chance that this will provide support. If it doesn't, then the next stop down is
2639 38% retracement
2672 Closing Vwap from Feb 14
2660 50% retracement
2650 An old POC formed by cutting out the volume at the all-time high and mainly including the sell-off and rebound period.
2629 61.8% retracement
2588 Closing Vwap from Feb 9th which made a double bottom with Feb 5th whose Closing vwap was a tad higher at 2594.

Note

SPY 5 min opens much lower.... at a previous vwap close level from 2 days earlier almost but not probed yesterday.

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March 23rd deep drop went to the lowest Vwap Close of the selloff a month or so ago, moreover one which had never yet been retested. Odds are that the the Feb low will now be tested, but this was an excellent target for the sell-off yesterday. Unfortunately I had not drawn it onto the June contract trading chart and only noticed it today when reviewing longer-term situation....oh well...

Note

PS - on these charts, once a Vwap Close is hit in subsequent action, I remove it. Quite a few were hit during the early March correction, for example. This one yesterday was the oldest one. There are many, many below from the run-up into January which probably at some point will be corrected-back-to, but of course one never knows.

Note

This is not Closing Vwap but rather POC analysis, but they are related, being based on Volume-at-Price calculations.

Note the still-existing POC on the Daily Chart last hit November 2016, i.e at the election. This makes it quite likely that a correction back down there is in the cards, though perhaps the two areas just above it will become new POC levels and halt any such decline. And you can also see that there is ALOT of work to be done before current levels 'threaten' those old POC levels down below. If there is a trade war or a bond market crash, expect a correction to the 2100-2200 level at least, which is around 30% from the all-time high and a steeper drop, I believe, than the great Crash of 1987.

(Which is also how well the market rose after the election, truly impressive..) But if the bankster classes go to war with the Administration, as seems likely, they could take it back down there quite easily...

Note

Actually, looking again at that Daily chart above:
I think it's significant that despite the wild swings of late, increased volatility and moreover going over the same prices again and again over two months - which they didn't do so often on the way up - the fact that the volume histogram on the left is still so much thinner than the large areas of accumulation and distribution down below, I think that's significant. It means, I think, that despite all the noise and emotion, that the air is thin up at these levels. So I am more inclined to suspect that a steep correction is in the cards, even though the monthly chart is still so solidly bullish and the weekly is nowhere near being outright bearish. But things which go up fast can come down fast. Ask any bouncing ball.

Note

The latter is unlikely, though, if you look at the Weekly:

Here it 'feels' like after 2-5 months waffling around, it might then be ready to plunge well below the bullish Ichimoku cloud and take a serious run down below. Also after which it might have established a new, and much higher, POC, making a return to those old high volume levels less likely. But to shake those big, long-term bulls, there will have to be more scary down drafts, probing deeper. Expect more volatility for a while, most likely, but any downdraft will probably be followed by a rapid updraft. During any such machinations, the market will often correct to a vwap level if it has left it for a juicy swing in the last hour or two, which make for excellent pullback entry trades. Example below..

(30 min)

Here are some examples of both vwap pullbacks on 30 min and also my collective MA (averages 8 short and long-terms MA's, with a simple band around, which I find helpful for showing trend and likely pullback areas, especially when confirmed with vwap and/or Clouds).

Here are some better Vwap examples on the 5 min chart which is my main trading chart:

Of course, vwap is not perfect, but it's the best indicator out there if you had to pick only one, both for determining trend and anticipating key pullback/retracement levels. If you get one after a nice swing that is also a Fibonacci level AND a cloud level, it's almost like guaranteed money in the bank...

Note

PS (I usually don't paint the COllective band, just use it to generate paintbars as a visual aid encouraging me to stay on the right side of the trend. When 30 min and 5 min are in conflict and it's a range day, then I ignore or simply turn off.

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Mar 29, last day before Easter:
After another volatile, rocky period with plenty of heavy selling, market climbed back up to a previous level and - for now at least - hesitated. (Probably this will be the high of the day, but at the least it was a good place for a short scalp, esp. looking at the 5 min bars.)

In any case, another example of why this value is worth keeping track of, which is the point of this thread (which perhaps nobody is reading!).

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same situation with 5 minute chart...

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Note how although it powered through that level by 3 points, it failed to close above. Then within 10 mins went 4 points below....

An aggressive approach is to short 2 ticks below the level (in this case 46.00, which had almost been hit earlier a couple of times but not quite, indicating to me that the level was going to prove resilient/important, at least in the short term), then have scale-in entries every 2 points (or whatever) above in expectation that even if the level was broached, there would be an almost immediate retracement back to it. Which is exactly what occurred and which often occurs at these Vwap Prior Close levels.

During the day, after a decent move one way or another, the same thing tends to happen at the Vwap. In the case of a short one enters 2 ticks below the vwap and then scales in above if the immediate scalp target (usually 3-6 ticks) is not immediately hit. It might go through the Vwap, but if so it will almost immediately retrace there so that the net position will either be profitable or break-even. I haven't calculated it but would say that it has a better than 80% success rate this sort of vwap or Closing Vwap pullback entry.

Note

Well, the market much quite a bit higher, and indeed has gone through the next Previous Vwap Close (PVC) level not shown on the last chart. Next stop - VPC-wise - is MUCH higher.....

Note again: it went through the level but closed at the level. My guess is that 2660 is the next resistance (where the market made a sell pattern), but who knows?

AshHowes

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