08/10/2021 |

$ATVI Weekly Raindrop® Chart Case Study – Anchored VWAP, Anchored VBP, and Multi-timeframe Analysis

Most traders who fail to find success in the markets are often the victims of information overload. Adding every indicator to their charts that promise to be that “magic bullet”, leading more to confusion and doubt in one’s decisions, which then results in losses compounded until an account is withered down to zero. We’ve all been there and those of us still here are because we realized the benefit of “simple charting” with the most relevant indicators that suit our trading strategy to filter out noise and emotion. Today, we will look at a case study that involves using just three points of confirmation for entries and exits: The Anchored VWAP, Anchored Price by Volume, and Multi-Timeframe Analysis on the weekly chart for $ATVI (Activision Blizzard).

This is a weekly raindrop chart of Activision Blizzard (ATVI) showing the recent price action as well as relevant supply and demand levels that are shown using the anchored VWAP and volume by price tools on TrendSpider. This chart also shows the weekly raindrop chart which is a volume-weighted chart instead of a typical open/close candle and can help view volume flow and reversal points on the chart. The chart also shows the price respecting the 20-month SMA on the weekly chart which is possible using “Multi-timeframe Analysis”.

  1. This number represents the “anchor point” for the volume-weighted average price as well as the volume by price tool. This Covid low is a significant point to start measuring volume distribution and the average price per share paid because it was a capitulation event across the markets. The Covid low was also an important reversal point in the trend before moving up to hit new all-time highs. This point on the chart shows when sellers turned into buyers once again as the “status quo” changed. This is also a point in which the price respected the longer-term 20-month simple moving average shown using multi-timeframe analysis.
  2. This number represents where the price bounced at the Covid low anchored VWAP after a multi-week move down following a strong runup from the Covid lows. At this point, the price moved back down to the average price per share paid from the reversal point in March of 2020. At this point, supply on the market dried up due to a lack of unrealized gains by most holders as their positions went back to breakeven.
  3. This number represents the most recent bounce on the weekly chart shown by the confluence of several technical indicators such as the 20-month simple moving average, Covid low anchored VWAP, as well as the volume shelf shown using the anchored volume by price. The volume shelf represents an area where there are many shares holding and as price gets back down to this level, many participants are back to breakeven on their positions. Anytime the anchored VWAP and volume shelf are in-line with each other, this is a crucial level of interest below if price breaks down as it did here from the mid-$90s. Notice the blue raindrop as well on the weekly chart which can be a great tool to use for reversals in trend. There was also a blue raindrop right around the Covid reversal point, marking a bottom before new highs.
  4. This number represents the “volume gap” above shown by the anchored volume by price. This zone highlights a lack of shares holding in this range and the price can move very quickly down through it or up through it. In this case, ATVI moved down very quickly through the gap after bad news came out regarding the stock. If the price finds a bottom at the confluence of the indicators mentioned in #3, the price could move back up very quickly due to a lack of supply above until the next volume shelf above around $90.

So we hope that this case study helped to convey the importance of “simple charting” and how reducing the noise from overloading your charts with indicators can lead to a better win rate. Depending on your trading strategy, certain indicators that align with it will offer the best entry/exit signals.  TrendSpider works hard at offering a suite of indicators that work with almost any trading strategy; to include those mentioned in this case study.  Why not try TrendSpider out for 7-days free and see how our family of automated charting tools and indicators can work best for your trading strategy.