S&P 500: Volume Profile And Price Action Analysis

Hello guys,

in today’s daily analysis I would like to show you a newly formed Support on the main US stock index S&P 500.

The S&P 500 is currently at its historical maximums. It has never been higher. As I mentioned in my yesterday’s post, I am not into going Long at the top of an uptrend, praying the uptrend will continue. What I prefer is to wait for the price to make a little pullback. Then I jump in.

S&P 500: Price Action Analysis

The recent development on the S&P 500 was a pretty long rotation that lasted around two days.

In today’s Asian session, the price finally broke out of that rotation and started to trend again – it went up.

I am always interested when I see a rotation followed by a trend.

Heavy volumes get usually accumulated in a rotation. Big trading institutions use the rotation to get into their trading positions. When they are done with that they manipulate the price into a trend. They manipulate the price using aggressive Market Orders.

This is the reason I am always interested when I see this “rotation followed by a trend” pattern.

S&P 500: Volume Profile Analysis

So, when I see this, I use my Flexible Volume Profile to look into that area. I want to know how exactly the volumes were distributed there.

What interests me the most is where the Point Of Control (POC) is. In other words – I want to know where the heaviest volumes got traded.

If you check the picture below you will see that in this case, the heaviest volumes were around 4182.00.

ES 06-21 (S&P 500 Futures); 30 Minute chart:

This place is very important, because the BIG trading institutions placed most of their orders around this level. When the price makes it back there, they will want to defend it.

They will try and defend it using aggressive Long Market Orders. This should manipulate the price to go upwards again, making this area around 4182.00 a Support.

This Volume Profile Setup is called the “Volume Accumulation Setup“.

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Confirmation Price Action Setup

This area is not only important because of the heavy volumes. It is also important because it worked as a strong Resistance in the past.

If you look at the chart below, then you can see that the price bounced off this area quite strongly some time ago. This is how we can tell that it was a strong Resistance.

Now, when the Resistance got breached and the price started to move above it, the Resistance turned into a Support.

This is an old but good Price Action setup I like to use and combine with my Volume Profile setups.

You can learn more about it here:

Price Action Setup: Resistance Becoming Support

ES 06-21 (S&P 500 Futures); 60 Minute chart:

I hope you guys liked my today’s analysis. Let me know your thoughts in the comments below!

Happy trading,

-Dale

14 Comments

  1. Name S

    Great analysis Dale. I do have a question though. How can you analyse SPY when it is a follower. Usually NQ or the Dow?

      1. Neil S

        It seems to follow the Dow or the Nasdaq,eg when the NQ goes up, so does the ES etc At other times, it follows the Russell. regardless of that your Analysis is spot on.

  2. Nick Duckstein

    Dale,

    I’m looking at this now and indeed the 4182 area was very important. But price went all the way down to 4168. How would you have managed confirmation on that so as not to take 14 handles of heat before price reversed?

    Thanks,

    Nick

    1. Trader Dale

      Hello,
      no need to wait for crazy big movements here. This is why I prefer trading with RRR close to 1. Trade open was 4182, SL 4174, TP was set according to TP – so it was RRR = 1. This means TP was 4190. The price made it to 4192 before going down again. But I was not there anymore. But yea, I was tempted to try and catch a big fish here :))) I am glad I did not. I would not withstand the “heat” of the sell-off 🙂

  3. Johnson Yang

    so, if you buy at 4182, where do you set your stop loss and how do you determine or set the profit target ?
    Thanks.

  4. Manoj

    Hi Dale ,

    The POC does signal the highest node of volume but how do we assess the range in which the institutions
    put in a buy order. What are the signals you look for to give you an idea about the extreme ends of the range where buying started and it set its limit as an aggressive entry.

    Also in this particular case how would you put your stop loss if you intend to enter at the retest of the breakout from resistance. Great learning from your videos

    Thnx !!

    1. Trader Dale

      Hello,
      I consider the whole rotation a place where buyers were adding to their longs. The most important place is the POC, where the most volumes got placed. SL for this one was 4174. Below the “swing low”. I prefer trading with RRR = 1, so I set my TP according to this.

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