08/02/2021 |
$ETH Weekly Chart Case Study: Anchored Accumulation/Distribution & Anchored VWAP
Being able to identify “accumulation” and “distribution” patterns has taken some traders years to master. Numerous patterns, on different indicators, and subtle (yet important) differences on each timeframe to learn have been the reasons why many new traders throw in the towel due to the erratic and unpredictable nature of price action in these conditions. The team at TrendSpider worked very hard to help them hang in there by developing a simpler way to spot accumulation and distribution patterns with its Anchored A/D (Accumulation/Distribution) Indicator. Let’s have a look at how it can help you in making smarter trading decisions on the Ethereum Weekly Chart when used with the Anchored VWAP.
Ethereum Weekly Chart: Anchored Accumulation/Distribution & Anchored VWAP
This is a weekly chart of Ethereum looking at the price history since late 2019. As you can see, there are quite a few numbers on the chart showing trend reversals and price levels being respected using the “quarter-to-date” anchored accumulation/distribution indicator for trend changes and anchored volume-weighted average price (VWAP) for supply and demand levels of interest.
- This number represents the Anchored VWAP starting at the November 2020 breakout through the ascending triangle. This area is important to anchor from as this was a “status quo” change in the trend for continuation to new highs. As you can see, the price respected this level multiple times on the way up to the all-time highs in May of 2021.
- This number represents three different times since late 2019 in which the quarter-to-date “anchored accumulation/distribution” indicator flipped back to green after being in red. This indicator is a new tool on TrendSpider that allows you to see the flow of money from the start of each quarter or other event on the chart. This is using the “continuous” feature which allows you to see the accumulation/distribution from each quarter rather than just the most recent quarter. Notice anytime this indicator has flipped to green, this has been the start of a larger move up.
- This number represents the price bouncing right at the anchored VWAP in July of 2021 and being a strong reversal point for the price to hit the anchored VWAP from above from the all-time highs. This phenomenon of price bouncing back and forth between two anchored VWAPs is called the “anchored VWAP pinch”.
- This number represents the all-time high anchored VWAP which initially acted as a level for the price of Ethereum to cool off as the price moved up to the average price per coin since the May highs. This VWAP initially acts as a level for the price to pull back because as people start to break even after being in a large drawdown, they exit and add supply onto the market. Once the market can digest this supply, the price is able to move up through this level and cause the anchored VWAP to turn to a positive sloping line.
We hope that this case study was able to show you that spotting accumulation and distribution patterns no longer need to be a manual or a “by sight” task when using the Anchored Accumulation/Distribution Indicator on TrendSpider. Using a simple visualization that shows when accumulation and distribution are moving into positive/negative territories will be a powerful tool that will save you time and lost profits. Try it out for free for 7-days and let it do the work for you.
