In previous EURUSD analysis you can find detailed review of price moving in ascending triangle and the place where the price has broken the lower line of triangle. After the support was broken the price had no resistance and was falling during 1 month until it approached long term support which was created by previous low in March 2015. It was the place where we could expect resistance to lower prices. Analytical Trader detected very strong signal (Major Demand) near support and market turned up. There was very high activity during this day (the volume was very high, price range was more than 450 pips compare to average which is about 100 pips). Background has already changed from weak to strong.
Let’s get a closer look at this place in lower timeframe.
Even in this timeframe you see the same very strong signal (Major Demand) in place of price reversal. Here we have 2 wide spread up-bars on high volume. Volume always indicates the amount of activity going on, the corresponding price spread shows the price movement on that volume. Volume Spread Analysis seeks to establish the cause of price movements, and from the cause, predict the future direction of prices. The ‘cause’ is quite simply the imbalance between Supply and Demand in the market, which is created by the activity of professional operators. When reading the market, try to see things in context. If you base your analysis on an effort versus results basis, you will be taking a very sensible and logical approach that detaches you from outside influences, such as ‘news’ items, which are often unwittingly inaccurate with regards to the true reasons for a move. In our case 2 up-bars with high volume – this is effort to go up. Next bars show result of this effort – it is also bullish.
VSA and Reversal indicators will be very helpful for beginners in VSA, because even without deep theory knowledge you can easily find imbalance between Supply and Demand and a good setup for long/short trade. “Reversals” is our new indicator which with high accuracy shows the place where price changes its direction. If you are good at VSA theory, still you can use VSA and Reversal indicators, because they help you to understand the whole picture just at one glance on the chart and confirm your own view in the market.
In USDJPY analysis at first I would like to discuss H4 timeframe. After the shake-out which was also a stopping volume for mark-down movement, the price started to move sideways within trading range. This was a wide trading range. Therefore trading strategy was to wait price reversal near the resistance/support of the trading range and open a trade after the necessary signals from VSA setup. With VSA and Reversal indicators it is very easy to find a good entry and exit place. This pattern has been valid for 2.5 months until we had very strong signal (Major Demand) + Reversal signal. As a result there was a break-out from this trading range.
More recent picture we can see in M15 timeframe. Now the price has drawn two key levels:
- Long term support – on the above picture you can see how this support was established after several strong signals detected by VSA indicator. What is more important – the support has already shown itself twice when the price turned direction near this line (every time we had strong signals before price reversal).
- Long term resistance – this is the level which has also shown itself. Very remarkable setup here – up-thrust, which was also a stopping volume for mark-up movement. The up-thrust is a wide spread up-bar on very high volume which closed on the lows. The high of this bar is slightly higher than previous top (not shown in this picture). Weak Holders went long in this point and smart money used this liquidity to open short positions. VSA indicator also detected a very weak signal (Major Supply) on this bar.
Look carefully when the price is approaching these levels. VSA and Reversal indicators will help you to understand next price movement.
If we look at big picture in USDTRY, we can see that Turkish lira is moving up and now we have the biggest drawdown for the last 1.5 years.
Let’s look closely at the top of the market before price changed direction. Here we see several weak signals detected by VSA indicator. Reversal is also confirming price reversal. I want to draw special attention at up-thrust bar. This is a strong bearish signal suggesting that the price will continue to fall, especially when we have confirmation – following down-bars. Up-thrust has big volume representing high activity in this point. High of this bar is higher than previous one. Weak holders often place stop orders at the level of previous high and here these orders were activated. But it seems that professionals are not interested in upward move at the moment – the bar was closed on the lows. It means that selling absorbed buying in this bar.
There is a potential stop of the drawdown in H4 timeframe – wide spread down-bar on high volume closed on the highs. Also we have a Major Demand and Reversal in this place.
It makes more difficult to profit in USDTRY in long trades, because of swap value in this instrument: long swap is -67,6; short swap is 32,9. Therefore this instrument is interesting for Carry Trading (trade based on the different interest rates between two countries. The carry trade process involves selling currency of country with a low interest rate and using it to buy currency from a country with a higher interest rate). Therefore the drawdown is a very interesting moment to short this instrument on the top of the market or at the end of up-waves.
If we look at big picture in USDSEK, we see that Swedish krona has been moving in Mark-up phase since March 2014. It was a very persistent bull market without any reaction to the uptrend. As the price was reaching resistance level of previous high, the nature of movement was changed and mark-up phase was replaced by distribution phase. Price formed a resistance at 8.8000 level. It is well known that people think in round numbers and place limit orders, stop losses in this point. Here is some tip: Avoid round numbers when placing your stops – market-makers will know where your stops are. Above and below any actively traded market are not hundreds, but thousands of stops. The professional traders will gun for these stops, especially during periods of thin trading activity, as this represents an excellent moneymaking tactic.
In daily chart it is well seen that the price is moving sideways limited by levels of support and resistance. The rally was stopped when supply has entered the market (several weak signals on the chart). Nature of bullish trend was changed in this point and price started to move in a trading range. Watch carefully when the price is coming close to the support or resistance. Weak or strong signals in Analytical Trader will help you to understand whether the price will break these levels or not.
On January 15th this year, when the Swiss National Bank (SNB) suddenly announced that it would no longer hold the Swiss franc at a fixed exchange rate with the euro, there was the biggest single-day move for this country’s currency in the last 40 years. Now let’s see how the Franc is doing in 10 months after this event.
Since May USDCHF movements have been limited by two lines: 1. Up-trendline which represented support for the prices (each next low is higher than previous one); 2. Resistance level (at 0.984) – it was a reversal point for the prices. Also this figure is known as ascending triangle. Each time Analytical Trader has detected strong signals near the up-trendline and weak signals near the resistance right before the price turned its direction.
Recently we had a break-out through the resistance. Then the price moved back to this resistance just to touch it and continue to move up (it happens very often when the resistance becomes support). In time of touching there was no big volume (it is called no-supply) and it means that professionals are not interested in down move – they are now bullish.
Now background is strong. The price is reaching two important long-term resistance levels: previous high and the price level which was valid before the SNB unpegged the franc. It will be interesting to watch price behavior near these levels. Look carefully for weak/strong signals and volume when the price is close to the resistances.
As I noticed earlier, EURUSD was moving in an ascending triangle. You see how price several times noticed the long-term resistance. Every time Analytical Trader detected disbalance between supply and demand when the price approached the resistance level (by showing weak signals: Minor Supply, Supply, Major Supply). Once there was up-thrust – a sharp up-move beyond upper limit with wide spread bar on high volume closing on the lows (Analytical Trader detected Major Supply – very weak signal). Weak holders opened long trades during this move, hoping that this was a genuine break-out. Very soon their stop-losses were triggered.
Let’s get a closer look at this chart.
Last time when the price approached the long-term resistance we had 2 weak signals (Supply and Minor Supply). This has led to a price reversal. Right before the lower line of triangle was broken we saw several high volume and wide spread down-bars. The break-out bar was also on high volume. Therefore Analytical Trader can help us to predict whether the price is going to cross support/resistance levels or change direction. We just have to follow its instructions and it will significantly increase our chances to profit in the market.
