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11/22/2021 |

$SPY Weekly Case Study: Raindrop Charts®, Seasonality, Trend Zones, and Volume Shelves

Using a mix of technical indicators as well as non-technical indicators can help market participants get an edge in the markets. Using TrendSpider, we go over the different ways technical indicators such as Raindrop charts, Trend Zones, and “Volume by price” as well as non-technical indicators such as historical seasonality, can help get a full perspective in the financial markets.

$SPY Daily Chart

$SPY chart.

This is a daily Raindrop chart of the S&P 500 ETF, SPY. In this case study, we focus on using both technical and non-technical tools to get an edge in the markets to see where prices could go moving forward. The technical tools used in this case study focus on supply and demand in the market while the non-technical tool focuses on historical seasonality to see how particular weeks of the year have performed in the past.

  1. This number shows the anchor point for the “anchored volume by price” tool on the TrendSpider platform. This tool allows you to see where shares are aggregating from a specific point in time. In this case, the “anchor point” is the October 4th low which was an important pivot in the market before new all-time highs were hit in November. At this point, the “status quo” of the trend changed.
  2. This number shows the “volume shelf” which is a phenomenon that occurs using the “volume by price” tool whenever there is a large aggregation of shares at a particular point on the chart. In this case, you can see a this “shelf” is created by many shares aggregating from around $466 to $470. Many times, this shelf can create a base for the price to move up higher, especially when bullish setups like an ascending triangle are forming, as shown on the chart.
  3. This number shows an ascending triangle formation with trend zones outlining the formation, rather than exact trend lines. This use of trend zones allows for more flexibility around important levels which allows for the setup to become stronger as the number of points on both the support and resistance line, increases. Using exact trendlines, there would only be two points on both the support and resistance area on the ascending triangle. Instead, with the zones, there are about four points included for both the support and resistance zones.
  4. This number shows the historical seasonality for SPY over the last 5 years. In this chart, the historical seasonality for each week of the year is measured with a “win rate”. This win rate measures the percentage of time a particular week closes higher than the previous week. In this case, the week of Thanksgiving has a 100% win rate since 2016 which means that it has closed higher than the previous week 100% of the time over the last 5 years. This very strong seasonality into Thanksgiving week with the ascending triangle at the volume shelf suggests a potential bullish move into the end of November.

We hope that this case study helps to show how striking a good balance between “clean” charting and a few useful indicators can help you to improve your overall trading performance by providing more insight into price direction and trend than price alone can offer. Why not try out some of these indicators along with the many others available on TrendSpider for 7-days free with this special offer.