In a big picture (daily timeframe) USDJPY is moving upwards (Mark-up phase). You see that it is possible to draw an up-trendline with several touches (5 times market touched this line).
In H1 timeframe we have 2 important levels: resistance and support.
Long-term resistance. This level has been showing itself during long period. Several times the market turned near this level. The longer resistance is working, the stronger it becomes. Now it will require effort to cross this line. Effort can be recognized as a high activity (high volume) or no interest (no demand/no supply) in the market (can be analyzed through volume spread analysis).
Last time we had an up-thrust near this resistance. Up-thrust is a wide spread up-bar, accompanied by high volume, to then close on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background. Up-thrusts are frequently seen just before a down-move. Analytical Trader has detected two very weak signals (Major Supply) in this place and later the market moved down to the long term support.
Now the price has reached the long-term support and VSA indicator detected strong signal (background is strong). It is possible that the market will reverse in this place.
AUDUSD M30 Trade analysis:
- At the time of entry background was strong – it is wrong to be bearish in this place. Only weak background is a sign that imbalance between supply and demand is in favor of supply.
- Strong signal before trend changed. In addition, there is no weak signal. This is also wrong for a short trade.
- Entry was made when dynamic trend turned from green to red – ok.
- The trade was not closed after strong signal appeared in the chart. You should close the trade immediately in this place. Reversal signal is supporting exit in this level.
NZDUSD is moving in a trading range. The area between the upper and lower trend lines is known as the trading range. In VSA terms, the (sideways) market is trading within its range, and will continue to do so until applied (selling or buying) effort makes it break out.
A trader who uses VSA principles will analyse price action in the top and bottom quarters of the trading range, because important observations take place in these areas, as the price heads for the supply or support lines.
The area above the supply (higher) trend line is known as overbought and the area below the support (lower) trend line is referred to as oversold.
One more important line in this chart – long-term resistance. Price already several times reversed near this line. Therefore, it is important to observe price behavior near this area.
- Background was strong.
- Strong signals (2 Minor Demand signals) before trend changed. Reversal signal also confirms market turn in this place.
- Dynamic trend turned from red to green.
- Entry in a low volume down-bar. Stop-loss below previous low.
- Exit by reaching TP level.
Total: + 37 Pips
There is a very interesting pattern in AUDUSD chart. Movement is limited by two important lines:
- Upper limit: long-term resistance
On 04.12.15 we had high activity on the top of the market when price was near the level of previous high (look at the volume and spread). Then up-thrust happened. Up-thrusts can be recognised as a wide spread up-bar, accompanied by high volume, to then close on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background. Up-thrusts are frequently seen just before a down-move. Analytical Trader has also detected weak signal (Supply) on this bar. The market started to move down. I want to draw your attention that high of up-thrust is slightly higher than long-term resistance (previous maximum). Usually traders place stop-losses on this level or buy-stops to open a long trade in this place. In our case the stop losses were activated, long trades were opened, but the market has immidiately turned down leaving the traders with losses. This is a quite reliable setup after which we can expect prices to fall.
- Lower limit (support): up-trendline with several touches (already 5 times market turned near this line)
The longer support is showing itself, the stronger it becomes. Reversal signals appeared each time before market turned.
Now there is a high probability that prices again approach the long-term resistance. This pattern is also known as an ascending triangle. Eventually market will break one of these lines. VSA and Reversal indicators will help us understand the direction of break-out. Usually it is accompained by high volume and wide spread bars.
NZDUSD H1 Trade analysis:
- At the time of entry background was strong – background didn’t have time to turn weak and it is wrong to go short in this case
- Weak signal (Minor Supply) before trend changed (moreover this signal appeared near mid-term resistance) – this is a correct setup for a short trade.
- Entry after dynamic trend turned red – it is o’k (the best way to open trade in a low volume up-bar while the price is not far from market turn). It is better to place stop-loss above resistance (in our case it is below – not o’k).
- Trade has to be immediately closed after two Minor Demand or Demand, Major Demand signals, because there is a big chance that prices will turn direction after this signal. Reversal signal also confirms market turn in this place.
This is a near resistance trade which was opened after up-thrust in USDJPY.
In this chart we have long-term resistance which was created by previous high. At first market was rising, than we had an up-thrust (2 wide spread bars with high volume).
Up-thrusts can be recognized as a wide spread up-bar, accompanied by high volume, to then close in the middle or on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background.
High of the first bar has almost reached the resistance level but closed in the middle. Further weakness showed in the second bar which closed on the low. VSA indicator detected 2 very weak signals here (Major Supply). Reversal indicator also suggested that market can turn in this place.
- In H1 timeframe background was neutral. In this case you should check above timeframe. H4 was weak, so it is o’k for a short trade.
- Several very weak signals (Major Supply). Reversal indicator also confirms market reversal in this place.
- Entry was made when dynamic trend was red.
- Exit after 2 Minor Demand signals (Reversal signal also confirms the exit)
Total: + 110 Pips
