12/14/2021 |
$QQQ Daily Chart Case Study: Anchored VWAP, Volume by Price, Automated Gap Detection, and Seasonality
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 the different ways to use technical indicators such as Anchored VWAP, Volume by Price, and price gaps. We also discuss seasonality and where to start measuring historical seasonality from.
$QQQ Daily Chart
This is a daily chart of QQQ from the beginning of October 2021 to early December 2021. In this chart, 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. From a non-technical perspective, we look at historical seasonality and the logic behind measuring seasonality from important technical points on the chart.
- 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. 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 to earnings, to the beginning of the year.
- This number shows the anchored VWAP with a percentage offset below the anchored VWAP which is a margin of error for win 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. 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.
- 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. You can create alerts on top or bottom of this gap to know when the gap is starting to fill or has fully filled. However, many times the price can take weeks or months to fill, or never fill.
- 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 holding 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. This is where the understanding of supply and demand curves really can come into play.
- This number shows historical seasonality on TrendSpider looking at the win rate for each month of the year since 2016. The reason 2016 was chosen as a start date is that this was a very important reversal point for all of the broad markets after a hard pullback at the end of 2015 which bottomed in 2016. The win rate is simply the percentage of time that a month closes higher than the previous month. In this case, you can see December is a strong month for QQQ with an 80% win rate over the last 5 years. This strong seasonality suggests that QQQ could hit new highs if it is able to get above the supply zone shown by the anchored volume by price mentioned in #3.
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.
