NZD/CAD: Volume Profile, VWAP, and Price Action Analysis

Hello guys,

today’s day trading analysis will be on NZD/CAD.

There was a pretty strong downside move yesterday which created nice trading opportunities.

Before this down move started, there was a tight rotation in the Asian and beginning of the European session.

I am always interested in how the volumes were distributed in such areas, so I used my Flexible Volume Profile to look into it.

Volume Profile Analysis

As you can see from the picture below, the heaviest volumes in this rotation area were accumulated at 0.9187.

This is the place where I think the sellers who initiated the down move were accumulating their Shorts – most of them at 0.9187.

Why do I think it was Sellers who were building up their positions there? Because the heavy volume area was followed by a sell-off.

Now, what happens, when the price makes a pullback into this area at some point in the future?

I expect those Sellers who placed their shorts around 0.9187 to defend this zone as it is clearly important to them. If they succeed, then it should drive the price downwards again.

That’s why I think the 0.9187 will work as a strong Resistance in the future.

Below is a 30 Minute chart of NZD/CAD:

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Volume Cluster Around 0.9137

Apart from the 0.9187 Resistance, there is also one more thing worth pointing out here. Those who follow me for some time may have already noticed it.

The thing is, that if you look at the Flexible Volume Profile which I stretched over the whole trend movement, you can notice another significant volume zone. A zone around 0.9137.

If such a volume zone is formed within a trend, then I call it a “Volume Cluster”. Such Volume Clusters represent strong Support/Resistances.

In this case, it indicates, that Sellers were adding to their Short positions around 0.9137 – that’s where the Volume Cluster has the heaviest volumes.

I call this setup the “Trend Setup” because it appears in trends.

As you can see from the picture below, the price has reacted to this area very nicely earlier today. It was a very nice trading opportunity.

What I love about the Trend Setup is when it can be combined with other trading setups. Like in this case.

Support → Resistance Setup

If you look at the picture above, you can see that the price reacted to this 0.9137 area twice in the past (12th January).

This means that it worked as a strong Support. Then, when the price went past the support yesterday, the Support turned into a Resistance.

This is a simple and working trading setup which I like to look for. You can learn more about it here:

Support→Resistance Setup Guide

The cool thing about this was that the “Support→Resistance Setup” aligned with the Volume Profile “Trend Setup”. They both pointed to the same Resistance level around 0.9137.

VWAP Trend Setup

Now, there was one more confluence to those two setups I showed you.

It was a VWAP Setup which I call the “VWAP Trend Setup“.

Essentially, this setup says that when the price gets below the 1st VWAP Deviation (that’s the grey line), then this line becomes a Resistance and the price should bounce off it.

With this kind of VWAP analysis, I like to use the 60 Minute chart and Weekly VWAP:

A Quick Summary

As you can see, this trading Resistance was based on three independent trading setups, which nicely aligned and all pointed to the same trading level. No wonder, the level worked like a charm!

To sum this up, here are the three setups used:

Volume Profile Setup: Trend Setup

Price Action setup: Support → Resistance

VWAP Trend Setup

I hope you guys liked today’s analysis. Let me know what you think in the comments below.

Happy trading!

-Dale

7 Comments

  1. Erik

    Hi Dale,
    Many thanks for your analysis. May I ask you why NZDCAD is not listed in your daily levels of your indicator but only in the swing ones?

    1. Trader Dale

      Hello Erik,
      my main focus for intraday trading are Major pairs, but with swings there are way more pairs I like to trade.

  2. Brent King

    Dale, on the weekly VWAP I was wondering if you considered the 1st. standard gray line anything other than resistance? Did you ever think it would revert back to the mean or because of your experience you knew it would be resistance? It was a beautiful setup for sure.

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