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04/07/2021 |

$FSLY 65-Minute Chart Case Study: Anchored Volume by Price and Anchored VWAP

In this blog post, we will look at how to gain an advantage using the Anchored Volume By Price and Anchored VWAP to identify support and resistance areas of liquidity. By applying the AVWAP and the AVbP together, points for profitable entries and exits can be spotted for a complete trade. This concept is illustrated on the chart by both creating a visual range between the average price a security has traded at throughout the day/time frame (AVWAP) and the total trading volume at different price levels (AVbP) on the volume shelf, which might make for a price range to target from the current position. For this case study, we will look at Fastly ($FSLY) on the 65 min chart and how using these two indicators in conjunction may be of interest to you.

$FSLY 65-Minute Chart

$FSLY chart.
This is a chart of Fastly ($FSLY) on the 65-minute chart from March 25th to April 5th showing how price is interacting with the anchored volume by price using “volume shelves” and the anchored VWAP. The reason we are using the 65-minute chart vs. the 60-minute chart is due to the fact that 65-minute charts have 6 even candles for the daily price action (390 minutes/65minutes = 6 even candles) compared to the 60-minute chart having 6.5 candles.

  1. This number represents where the anchored VWAP and anchored volume by price start from. In this case, this is at the swing low where the trend reversed (price bottomed) to the upside and the “status quo” changed to a bullish move to the upside.
  2. This number represents where the second anchored VWAP starts from which is the swing high and short-term reversal point in the uptrend that started on March 30th. Notice how price respected this area and failed to close above it as the price was dropping below to fill the price gap around $68.
  3. These numbers represent “volume shelves” that have formed using the anchored volume by price. The volume by price measures volume as a function of price rather than time. Each gray volume node represents how much volume is holding at different price levels from the swing low which is mentioned above in “1”. Anytime price is above a volume shelf, the volume shelf will act as a possible area for price to stabilize or bounce from. Anytime price is below a volume shelf, that area will act as a supply zone above as holders get back to breakeven, potentially selling their position and moving their capital elsewhere.
  4. This area shows a “volume gap” which is an area where there is not a lot of volume holding. This area acts as a “vacuum” for price as there is not a lot of supply to get through until the next volume shelf above (3).

The Anchored VWAP Indicator

On TrendSpider, you can adjust the settings of the AVWAP Indicator to a specific point in time of your choosing (swing highs/lows) to see when the market may have experienced a significant event which has influence price. In addition to broad market events, it can also reveal insights into the buying/selling patterns of institutional investors and lets retail traders ride in the wake of their moves. TrendSpider makes it easy to use the AVWAP with several unique settings. Start by clicking on the  next to Indicators on the top menu bar to open the dialog. Add Anchored VWAP to your indicators, and customize the settings based on your goals.

Anchored VWAP Indicator.

More on the Anchored VWAP here.