Dynamic trend: Turned up
Background: W1 – weak; D1 – strong
Phase: Markup
Support: 113.60
Resistance: 116.00
USDJPY: Hourly
Observations
Point 1: There was a breakout of the resistance level, with an average range and a high volume. The following up-bar confirmed buying. In addition, on a smaller TF, we can observe a successful testing after this breakout, which confirmed the validity of this movement.
Point 2: We may see a “Shakeout” with a wide range and very high volume. Because the subsequent bar was a down bar, and the volume was high, we may conclude there is a large supply in the market, which must be tested.
Point 3: A second breakout of the resistance level (113.60) occurs.
Suggested Strategies
- Consider buying if “No Supply” appears (down bar with a narrow range and a low volume) near the support level 113.60.
- Consider selling if the price breaks down the support level 113.60 and “No Demand” appears (up bar with a narrow range and a low volume).
Tips
On the previous week post about the Yen, we noticed that there was consistent buying in the hourly chart, and that a dip into the lower part of the range would give a long opportunity. This happened, and right in the next London session!
On trading ranges showing VSA buying signals, like we note on the trading guide, you can also wait for a breakout of the trading’s range high. If on the break, the volumes pick up, it’ll be a confirmation of accumulation. This is what happened in USDJPY, and since then, it has been on a long rally, until stopping on a long-term trendline.
Apart from the down trendline, the momentum of the uptrend is now fading, and there is significant supply showing up. This is inevitable on resistance areas, but still, if you’re holding a long in intraday, this is a good time to start reducing the position size, and wait for a trendline break to add into. Personally I’m holding a long daily trade, and waiting to see how the daily bar closes.
If the trendline is broken, it’ll be a long/adding signal. If supply keeps showing up on the hourly, and/or there are low volume rallies into the current selling bar, it’ll be a short signal.
After a wide upthrust bar, also marked as heavy supply, on last Wednesday, the Yen broke the support at 107.62 the day after. It broke with healthy volume, and the prices only stopped downtrending on a reverse upthrust, and later a churn, which are volume patterns that show demand.
USDJPY H4 Breakout
On M15 the action can be seen more clearly, and the trading range in the last days is more evident on this lower timeframe. By today’s end of Tokyo session, at 5 am GMT, the market showed supply on very high volume, from the three timeframes – M15, M30 and H1. Right now the prices are trending lower, though on very thin volume due to Japan’s bank holiday on 3rd May. Thinly traded markets can be an opportunity for large players to make their movements however, since there is little to no resistance to any significant organized action.
It would be wise to be on the lookout for more demand/strength between 106.200 – 106.300. To the upside, the price 107.62 is the trigger for short positions, if the supply shown in H4 proves to be consistent. The fact that there are many announcements regarding unemployment on US will surely provide plenty of movements, and make the price reach these critical areas in USD/JPY.
USDJPY M15 Demand Zone
Following the last update on GBPUSD, shortly after there was a breakout with a volume above average, with strong signals behind. This is seen in zone (1).
8 hours later, there was a churn down bar (2), which was an indication of more buying above the broken level. The long position was taken right after, with the stop-loss below the break-out bar’s low, and the take-profit below the next resistance. After a short correction on low volume, prices kept on rallying, until reaching a climax (red) bar, and VSA showing a supply signal next to it (3). This was a +148 pips move. There is where the trade was closed. Since the background is now weak, there is now a sell signal if the previous low is broken.
Update 7th March: After the low on the supply bar was broken, the prices went down on wide spread, but low volume, which should have been the warning sign to tighten the stoploss. The stoploss was hit above the nearby resistance at 1.42507. Total: 148 – 53 pips = 95 pips
Volumes and Reversals Trading GU
GBPUSD
After the confident 1.42450 and 1.40650 support breakout, prices haven’t managed to make the same thing with 1.38460 support, and now British Pound market tests the 1.40650 resistance level.
During previous 2 weeks bearish market confirmed its sentiment:
In point 1 prices tested 1.43890 resistance level which showed the interest from institutional players and was marked by VSA Indicator as W1 supply signal. Before that, in point 2, market showed, that there were no strong signs of the imbalance near 1.42450 support level which meant, that big players were not going to change its short positions to long ones.
There was a 1.42450 support level breakout on high volume which again showed initial sentiment of the market. As the result of that breakout, the 1.40650 support level went through as well, and the steady downfall of the market stopped at the level 1.3846.
Points 4 and 5 suggest that minor demand signals and low volatility on the bottom of the market is not the sign of the bearish trend finishing. The beginning of a sideways is possible, which is confirmed by neutral background.
Due to the absence of stronger demand signals on the bottom of the market, now it is too early to speak about the change in GBP market sentiment. In current situation it is important to see how the market will behave near the 1.4065 level and above it, if such situation happens. In case of a supply signal near the resistance, or no demand with a volatile down candle after it, it’s possible to take a short position, but only on weak background.
If there is 1.40650 breakout candle on high volume, it will be the time to start searching for long positions.
GBPUSD H4 – Downtrend and VSA
EURUSD
Having tested the 1.10050 short-term support in the point 1, the Euro went above 1.10440 level, and revealed, that there was no smart money interest near the 1.10684 long-term resistance, which was confirmed by low volumes in the point 2. The point 3 is the place where prices went beyond the 1.10440 level, and above average volume on down candle with the supply from VSA indicator showing the bearish sentiment of the market.
EURUSD – Downtrend and Volumes on market Bottom
In the point 4 there was the 1.10050 and 1.09590 support breakout on high volumes – the good sign of confident bearish trend. Next evidence of down sentiment of the market is the point 5, the place, where prices successfully tested 1.09590 level resistance – it remained unbroken. Moreover, it was the good place for big players to add to short positions – that’s what they did, as the high volume volatile down candle showed. After that the 1.09150 level was went through, and the market eventually paused its down motions by 1.08380 level.
The current market situation can’t be called the end of the bearish trend due to the absence of the strong demand VSA indicator signals and to weak background.
Undoubtedly, there are demand signals in the point 6 and 7, but the volumes are not too high to be stopping volume and the up candle volatility after it, is around average.
So in the current situation the full picture will be seen at the 1.09150 resistance level. In case of high volume breakout candle, previous short positions should be closed and possibly reversed for long positions. If there are supply signals at the 1.09150 resistance level or low volumes near it as no demand signal, it’s possible to open new short positions or to add to current shorts.
In my previous EURJPY analysis I pointed out that the prices were just testing a down trendline, and given the accumulation seen behind, it’d be wise to wait for an up-breakout of the resistance. Subsequently, this trade was taken based on these developments:
- The background was strong at the time of breakout, which maximizes our chances.
- There was accumulation behind, shown by multiple demand signals without the price going to new lows. Note: there is a difference between the older post chart and this one, as the previous was from GMT-5 feed, while this is from a GMT+2 feed, both in Oanda. Nonetheless, the market picture is fundamentally the same.
- The break-out showed increased volume not exactly on the break-out bar, but in the next one. This is usually fine, but I prefer to wait for confirmation when this happens. The confirmation was given a few hours later, after the low volume down bar was broken to the upside, showing clear lack of supply in the market.
- The first warning sign to exit was the extreme volume up bar, with no follow-up. Later a Supply signal from the Daily showed up, which confirmed the weakness. Closed when the trend turned yello. The take-profit from an alert would give an exit around these prices as well. However, if you have the time to manage your trade, and can react to changing supply/demand in the market quickly, trading without take-profit with this system also works.
Right now I’m holding a short position in the daily, as this weakness is just below a long-term down trendline. The correction is seeing relatively low volumes, but that could be normal after the distribution seen on the red bar. Either way, the trend is still down, and so, I’m just watching where the market takes me for now.
