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12/20/2021 |

$QQQ Daily Chart Case Study: Anchored VWAP, Volume by Price, Automated Gap Detection, and Raindrop Charts

Using a mix of technical indicators as well as non-technical indicators can help market participants get an edge in the markets. In this particular case study, we go over a follow-up to the previous week’s case study on QQQ to see how it played out. This case study also goes over the same features as the previous one to show how they worked out such as anchored VWAP, volume by price, and price gaps. This case study also touches on Raindrop charts which can be used as a divergence signal in the markets vs. regular candles.

$QQQ Daily Chart

$QQQ chart.

This is a daily chart of QQQ from the beginning of October 2021 to mid-December 2021. In this follow-up case study, we touch on different ways to visualize supply and demand using the anchored volume-weighted average price as well as the volume profile using the anchored volume by price. We also touch on price gaps that are crucial in technical analysis and how you can automate these on TrendSpider. Lastly, this case study focuses on Raindrop charts to help visualize supply and demand within a particular candlestick.

  1. This number shows the “anchor point” of the anchored VWAP and volume by price which is the October 4th low. This low is important as it marked the reversal point before QQQ started its journey to new “all-time highs” in November 2021. The anchor point for the VWAP and VBP should always be from a “status quo” changing point in the trend or stock price which ranges from swing highs and swing lows to earnings or the “year to date” point on the chart.
  2. This number shows the anchored VWAP with a percentage offset below the original October 4th anchored VWAP which is a margin of error for when the price broke down through this area back in October. This offset allows market participants to look at zones rather than exact price points on the chart. As you can see, the price of QQQ respected this area again in early December before bouncing hard afterward to the upside. The price was able to bounce at this area because supply dried up due to the average participant from the October reversal being back to breakeven. With this updated chart, notice the price moved down right to this area once again on Friday, December 17th before bouncing to the upside intra-day.
  3. This number shows the gap below on QQQ from the gap up after the price bounced off the anchored VWAP on December 6th. This gap is automatically detected by the “gap snake” tool on TrendSpider. As you can see with the updated chart, this gap did end up filling during the week of December 13th as the market was rejected at the supply zone above shown by the volume shelf (discussed next).
  4. This number shows the “volume shelf” and point of control (POC) which acted as a supply zone for the price from December 7th to 10th. This area acts as a supply zone because this area represents a large number of shares that are currently held above the current price. When the price moves up into this area, some of those participants sell because they are back to breakeven after a drawdown. As you can see from the graphic, this shelf once again acted as a level of supply which became a resistance zone for the price during the week of December 13th.
  5. This number shows the daily raindrop for December 17th which shows a green raindrop candle. A raindrop is a volume-weighted candle that shows both the volume-weighted average price (VWAP) for the first and second half of the timeframe of the candle. This chart type allows users to not only see the volume-weighted average price of the timeframe but also the volume profile of the candle. In this case, Friday’s close was a red day (closed lower than the previous day) but the green raindrop shows conviction by buyers during the second half of the day. This difference between the colors of a regular candle and a raindrop candle can be very useful for finding potential divergence.

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.