USDCHF Understanding the storyline with VSA and Volume

2019年2月17日

Here we are looking at USDCHF from late last year. This is the storyline

1. Price is in a clear downtrend

2. At new lower ground, volume suddenly picks up violently and further down move is absorbed by buyings. Are the Smart Money suddenly buying here?

3. Here we see a quick shakeout on high volume which is quickly marked up again, the bar closes in the middle range of the bar and the result of this was little higher prices. The shakeout was designed to trap traders into a short position.

4. At this point, we have a supply zone from before on high volume (the entire bar body where the arrow is pointing). This is where some traders previously went long, and the chances that they are locked in here are high. So we need to see if there is supply at this zone, traders who wish to breakeven or come out with a smaller loss. But there is not much activity here. We can assume that supply is starting to dry up.

5. At this point we can see that there is hardly any volume, some still exist and this must be removed as well.

6. Here we see a smaller downmove with no professional interest behind it. There is also not any pressure from the retail traders. We still need to test the remaining supply

7. Here we see a successful test. Very low volume down bar. This is our first possible entry point for a long position.

8. Here is our last successful test. Very low volume down bar closing on its highs. There is absolutely no selling pressure left. This is also a VERY powerful test, and the path of least resistance can only be up. This is a very high probability long entry. (this is also testing the previous high volume action we had on point 4)

9. Here we have a previous zone of locked in traders. This is very likely to provide resistance to higher prices and we can comfortably exit our position.