Paying attention to vwap at close of day
Updated
Vwap is magenta circles.
This short-term chart still shows a few days action. I have market with arrows and ellipses the areas to pay attention to. The first one on the day before Feb 1st large gap open. Not just a gap open, but also note that the price closed way above the marked vwap.
Sure enough, within several hours after the high open on Feb 1st, the market traded down to that closing vwap level, which was then tested another couple of times before the next up move.
End of Feb 1st: vwap closing price way above the price close. Sure enough, price came back up to it and a day later that was the support level market corrected back down to.
End of 2nd: on 3rd, large gap open and market continued up all day and closed well above it's closing vwap price (upper arrow). Expect the market to correct down at least to that upper closing vwap, but more likely the previous one around the 135 level. Note also the colour of the cloud is bearish, though for next day/week it turns to bullish. Still, that is a bit of a magnet or drag on the current bullish action. Often (not always of course) market will come back to the cloud if it is either above a bearish cloud or below a bullish one.
Now: if it doesn't come down, it means the sideways action is over and we will be zooming up to new highs. But after that is all over, it is STILL likely that whenever it has a more longer term correction, that it will come down to this 135 level. Check 30 min and Daily charts if things change significantly early next week.
Fwliw, given the fights with Trump and the Courts, I suspect the markets will hesitate a little until all this is sorted out. There are also rumours of a huge pedophile ring bust to be publicly announced once Sessions is sworn in. If that happens, this is going to be a BOMBSHELL, provoking either a major rally or sell-off.
We'll soon see.
PS If you scroll back in the chart you can see a gap on the 17th (market down) was filled on 25th finally. Now this is in generally sideways action. If a market is strongly trending, it will go to new highs or lows and not retrace all these gaps (though often they will try and/or they will get filled a few weeks later in longer-timeframe corrections).
This short-term chart still shows a few days action. I have market with arrows and ellipses the areas to pay attention to. The first one on the day before Feb 1st large gap open. Not just a gap open, but also note that the price closed way above the marked vwap.
Sure enough, within several hours after the high open on Feb 1st, the market traded down to that closing vwap level, which was then tested another couple of times before the next up move.
End of Feb 1st: vwap closing price way above the price close. Sure enough, price came back up to it and a day later that was the support level market corrected back down to.
End of 2nd: on 3rd, large gap open and market continued up all day and closed well above it's closing vwap price (upper arrow). Expect the market to correct down at least to that upper closing vwap, but more likely the previous one around the 135 level. Note also the colour of the cloud is bearish, though for next day/week it turns to bullish. Still, that is a bit of a magnet or drag on the current bullish action. Often (not always of course) market will come back to the cloud if it is either above a bearish cloud or below a bullish one.
Now: if it doesn't come down, it means the sideways action is over and we will be zooming up to new highs. But after that is all over, it is STILL likely that whenever it has a more longer term correction, that it will come down to this 135 level. Check 30 min and Daily charts if things change significantly early next week.
Fwliw, given the fights with Trump and the Courts, I suspect the markets will hesitate a little until all this is sorted out. There are also rumours of a huge pedophile ring bust to be publicly announced once Sessions is sworn in. If that happens, this is going to be a BOMBSHELL, provoking either a major rally or sell-off.
We'll soon see.
PS If you scroll back in the chart you can see a gap on the 17th (market down) was filled on 25th finally. Now this is in generally sideways action. If a market is strongly trending, it will go to new highs or lows and not retrace all these gaps (though often they will try and/or they will get filled a few weeks later in longer-timeframe corrections).
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First target reached (assuming you were short at end of day before I published this!). Market opened lower at level of previous close's vwap. Then rallied to fill gap between open and previous close.
Now has gone back down to test day low which thus far is holding (11.38 EST), but now in bearish configuration viz 3 minute (my usual daytrading one in trading view since no tick charts) which has a bearish Band signal kicked in and also underneath thin clouds. On the 15 minute published here, it is firmly in band support - has not penetrated on downside - and above nice, plump bullish cloud, so there is plenty of upside potential here now that the last vwap gap has been filled at the open.
If the market cannot rally to make new highs on this run, then the next level down is the much lower vwap gap market with purple arrow around 135, although around 135.50 there is an intermediate S/R level (marked by another arrow which was not projected out to the right but there is a low there right above the gap (which I would expect be filled if/when the market sells back down there.
So: either new highs fairly soon, or market will fail new highs and then probe lower to the vwap levels identified.
That's the theory anyway. Of course nothing written here is a recommendation per se, merely a way of looking at things using the vwap. How to configure trading signals from it along with proper money management (the most important factor) is not being dealt with.
In any case, this morning's initial action demonstrates very well the value/importance of keeping track of the vwap levels. If I had only one indicator, that would be it.
All best.
Note
AS of 10.45 am, the vwap trend turned down. I have put this into the code for the CollectiveMA which have published somewhere. If it isn't in the version published and you want it, let me know and I'll figure it out. It's not all that important except that often the vwap trends at very slight angles hard to see with naked eye unless chart blown up large; and usually - though not always of course - it doesn't tend to chop around all that much. When it does, the market is usually more volatile than usual and thrashing around in a trading range. Most of the time, once a trend sets up for the day in first hour or two, it continues (albeit with corrections where often a key retracement level is the vwap price itself, especially if it is around a key Fib level).Today the market reversed the bar immediately after it went up to fill the gap from yesterday (Friday) close, and made no attempt at all to probe the previous day high not much above it. This is a bearish sign usually. If the current lows are broken, expect a decent move down to next support level.
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Trade idea as of 12.00 EST: Stop entry short at 136.06 with target of 135.5. There is a futures contract (ER) which is the main one traded but because it is delayed and shows overnight sessions I use the IWM for charting studies. 1000 shares = $100 per point, i.e. 136.20 to 136.1 = $100.00 which is the usual target I use for scalping using the Collective Band as the main referent (along with Clouds and vwap).Note
13.00: it broke down during the 12.30 bar and is now on the way to first support level (where I put in Profit Target - PT - around 135.5 which is about $500 at 1000 shares, or in futures contracts I think 1 contract would be $500 also ($100 a point). Anyway...Note
135.6 is flat bottom of Ichi cloud. That sometimes provides S/R level.Note
13:06 Target hit for $450 gain. If had multiples - which too hard to set up in this interface, would take 50% off here and let 50% run to the lower arrow and older vwap gap. In any case, this is a previous vwap gap (the shorter arrow to the left) and subsequent pullback/swing low level which is why it was the first target.Note
I have to leave for airport. At 13.09 after hitting my target almost to the tick, has now bounced back considerably. This demonstrates how the level was significant part of the market 'structure' - the point of sharing this approach in this post. That level is easy to identify using the vwap. Although of course market can still go anywhere from this point, the way it hit that level and immediately found support shows how that level is important.Note
Around 12.45 EST on 7th, the second level indicated by purple arrow hit.And again, that level provided support.
Case closed. I drew the two levels before market open on 6th. In each case they were hit within very narrow margin and provided support.
Note
Feb 8th AM: gap down lower open hitting the next purple arrow level (and going through) before immediately retracing back up to fill the gap. Now all these vwap gaps have been filled, market can go any which way. The trend is down after all this but unless we get significant down move from here, it's all sort of trading range activity which the Daily Chart clearly displays.
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