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06/16/2021 |

$SPY Daily Chart Case Study: Relative Volume and Seasonality

There is so much more to volume than meets the eye on free charting software platforms. TrendSpider’s new Relative Volume Indicator adds another visual element to charting with volume. The indicator allows traders to visualize buying and selling momentum in the given timeframe they are charting within or compare against higher timeframes with MTFA enabled. Using spikes in relative volume can help you understand where the power movers of the market are headed helping you flow with larger market participants, or find assets in accumulation. Let’s take a look at the $SPY and how you can use the Relative Volume Indicator (RVOL) to trade this popular ETF.

$SPY Daily Chart

$SPY chart.

This is a daily chart of SPY looking back since early April near the origin of the resistance line above. This case study looks at the recent breakout through previous all-time highs as well as levels to watch above if there is a continuation up. This chart also looks at the recent relative volume which shows this recent move up was on volume below the 20-day average. Lastly, “week of the year” seasonality is explored into mid-June with some very interesting statistics.

  1. This number looks at the recent breakout through the previous all-time high pivot point back in early May before the mid-May selloff. This recent breakout could bring in new market participants who play breakout moves to the upside, adding fuel to the fire for further moves up, possibly to the resistance trendline above.
  2. This number looks at the trendline resistance above with a “sensitivity” alert created on this line. This “sensitivity” alert allows you to create a margin of error around your trendline, so you are alerted when the price gets close to the trendline rather than having to hit it perfectly to the penny. You can also create these zones on other “upper indicators” such as moving averages, anchored VWAPs, Bollinger Bands, and anything else that price interacts with.
  3. This number shows the relative volume indicator which allows you to see if moves to the upside or downside are moving on above or below-average volume. In this case, we are measuring the 20-day average volume. Anything shaded in green above the yellow line shows above-average volume. As you can see back on May 12th, there was a spike that shows volume about 1.8x the 20-day average. You can see on the Y-axis the different numerical values. These values correspond to how many times greater the volume was vs. the average. In this case, 1.80 means 1.8x the average volume. Notice this latest move to the upside after bottoming in mid-May has occurred with volume below the 20-day average volume. However, you can see the volume starting to get some strength as it hits higher lows.
  4. This number shows the “week of year” seasonality since the broad market bottom in 2016 after 2 years of being range-bound. This chart shows that going into the 26th week of the year, there is a 0%-win rate since January of 2016. If the price moves up to the trendline above into the end of next week, you will have both technical resistance as well as weak seasonality which would be a reason to be cautious into the week of June 21st.

We hope that this case study illustrated how using TrendSpider’s Relative Volume Indicator (as opposed to simple histograms bars) provides a better read on buying and selling momentum through an easy-to-understand visual representation of the order flow of market participants, using volume. Discover how this indicator can help you level up your trading game with a free 7-day trial to try out all the features that the best technical analysis software has to offer?