In the previous GBPUSD analysis I noticed that the price was approaching Long Period Support and wrote that it is possible that the price starts reaction to the downward trend. Later I saw in the chart strong signal (Minor Demand). There was no high volume bar (effort) which was necessary to pass the support and it was clear that now we should expect prices to go up. It does not mean that this is a good point to go long, because background is still weak. But this would be wise to close short positions in this point.
The price was moving up, but the background was still weak. Therefore I waited supply or no-demand signal (better if it was near resistance) to open a short trade.
I found a good setup in M15 Timeframe:
- The background is very weak.
- Price is approaching Long Period Resistance.
- Here we can see at once several weak signals (supply), price is near the resistance.
- Dynamic trend turned from green to red, entry in up-bar. Stop loss above the resistance, later moved to break-even.
- Strong signal (Minor Demand): in VSA this is a shake-out – wide spread bar on high volume (weak holders are still selling, but strong holders already have bullish view in the market – that’s why high volume and bar closes on the high).
- Exit: Total 67 Pips.
I decided to prepare long term analysis for EURUSD before Federal Reserve System will announce its decision on September, 17 for the issue of raising interest rates. A rate hike would likely lead to a stronger dollar, and entice global investors to park more of their money in the United States instead of emerging markets. That could ultimately affect developing nations’ currencies, exports, and even employment levels. Also it will influence further development of EURUSD exchange rate. Right after the announcement there will be high volatility in the market, so it is better to avoid opening trades in short timeframes.
- This was a weak signal on the top of the market (no-demand bar) which marked the beginning of downward trend. Low volume on the top of the market shows that professional buying has withdrawn from the market. The market is unlikely to go up without interest in this move from the smart money.
- Here we see a very weak signal – up-thrust. The price is marked up and premature short traders are liable to panic and cover with buy orders. Traders looking for breakouts will buy, but their stop-loss orders are usually triggered as the price plummets back down. All those traders who are not in the market may feel they are missing out the move and start buying. An up-thrust is usually indicates lower prices. This action brings weakness to the market, but it is important to look at the overall picture – in this case wait confirmation of this effort and further weak signals.
- The indicator has recognized a very strong signal (Major Demand). This is a down-bar which closes in the middle on high volume (the volume is higher than during previous several days). If this volume was bearish – why the bar closed in the middle and the next bar is bullish? It helps us to understand that there was more buying than selling. This is a shake-out (smart money are buying all sell-orders coming into the market) and starting point of bullish trend.
- We draw up trendline with as minimum 3 touches. It will help us to identify when the price will be in oversold zone (under the trendline).
- The price has come to oversold zone (under the trendline) without weak signals in the background. Major Demand signal helps us to understand that this is not a genuine move and we can anticipate that the price will be returned to up trend.
- Overall strong background is supporting the move.
Swiss Franc is now in a bullish trend and at the moment we do not see weak signals which could tell us that this trend is over.
- We have been witnessing as pound was ranging between 1.55 and 1.65 for a period more than 1 month. It was distribution phase where professionals have been distributing their positions to weak holders.
- In the end of distribution phase there was mark-up through upper trading range. Supply signal tells us about imbalance between supply and demand created because uninformed traders are buying in this move. High volume and closing of this bar in the middle says that professionals are busy selling to the weak holders.
- VSA is all about weak and strong signals in the market that we assess looking at overall picture. When the price comes to lower trading range, we see wide spread down bar. High volume and weak background tell us that this was a genuine break-out.
- Again we see high volume down bar before the price breaks support (previous low).
Now the price has come to another support. At the moment we do not see supply signals. Background is still weak. We need to wait further development because there is possibility that the price will start reaction to the down trend.
For some time now that I’ve been looking closely at the Yen’s daily movements. Prices are swinging around a resistance made back in 2007, and it’s interesting to note that so far there has been a rejection of new highs. Every time the prices went above it, there was supply and the prices came falling down, which is what’s happening right now. In the beginning of July there was some demand coming in near the up trendline, which sustained the prices, but it may not be enough. The market will next test the trendline, and if decisively broken, we can expect lower prices; if it’s maintained, we should trade according to the action on the resistance, and either wait for a break-out and a test for a long, or a false break-out with more supply signals for a short position.
In the H4 the recent action can be seen more clearly, with supply and really high volumes above the resistance, and where the background had already turned to weak.
In March and beginning of April, while there were plenty of bad news for the Euro, with some commentators even speculating the Euro-zone would break, the professional money was actually accumulating. They do this using the added liquidity of people selling in panic, which allowed them to buy Euro’s without making the prices go against them. This can be seen by the green dots (Major Demand) of AT – VSA, and the very high volumes in that area.
Since then, prices have rallied and are now near the up trendline. It could see higher prices if the current downtrend in the lower timeframe’s is broken, and so it might be useful to check how’s H4 doing.
The down trendline was recently broken, but as the prices rose above it, the volumes dried out, in a clear demonstration of no demand. The last bar finally rejected the down trendline, on very high volume (red bar). This is bearish for the moment being, and I’d like to see this trendline being broken to take a long position.
