Trading Volume Clusters on ES (S&P 500 Futures)

Quite a lot of people like trading indices using the Volume Profile tool.

In my experience, the Volume Profile works fantastic with indices. In fact, I am also planning to add ES (SP 500 futures) to the levels which I publish daily for members of my Trading course.

So, today, I would like to have a closer look at the ES and show you my intraday trade analysis using Volume Profile there.

Let’s look for some Volume Clusters!

There was a strong buying activity on Monday and buyers were pushing the price upwards.

When I see an intraday uptrend like this, then I start to look for significant Volume Clusters formed within the uptrend.

Such Volume Clusters point to places, where the buyers who are pushing the price upwards were adding to their buying positions.

So, when I used my Flexible Volume Profile to look in the trend area, then it showed me this:

*ES 03-20; 30 Minute chart:

In the picture above, you can see three significant Volume Clusters. Those were the places buyers used to accumulate their buying positions.

Let’s now have a look at those Volume Cluster one by one!

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1st Volume Cluster (3351.50)

The first Volume Cluster got formed at the break of day – Monday and Tuesday. There was a nice little rotation and heavy volumes got traded there.

Two hours before the market close on Tuesday, this level got tested. There was a sharp and precise reaction to it.

Because the price already touched this level and reacted to it, I consider it a tested level. For this reason I will discard it and I won’t trade it anymore. Chances for another reaction are lower now.

*ES 03-20; 30 Minute chart:

2nd Volume Cluster (3338.00)

Out of the three Volume Clusters I like this one the most.

As you can see, the volumes in this Volume Cluster are really nicely visible and the level is very clear and easy to see.

Most of the buyers from this uptrend were adding to their positions at this place.

What I expect now is that when the price makes it back to this level again sometime in the future, those buyers will become active again and they will start pushing the price upwards again.

This does not need to happen today or tomorrow, not even this week! Markets have good memory, so even if this level gets hit in 2-3 weeks I will still believe in a buying reaction from there.

*ES 03-20; 30 Minute chart:

2nd Volume Cluster – VWAP confluence

What I also like about the 2nd Volume Cluster is that it is in confluence with 1st deviation of Weekly VWAP!

It is the grey line I marked in the picture below.

Right now this line is little bit below my support, but it is still moving and slowly heading upwards. Chances are that when the price re-visits this support again, this 1st VWAP deviation will be somewhere around.

*ES 03-20; 60 Minute chart:

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3rd Volume Cluster

the last Volume Cluster was created before the beginning of the uptrend.

Funny thing is that the heaviest volumes within this uptrend were not accumulated there (they got accumulated at the 2nd volume cluster).

Usually it is not like this! Usually the heaviest volumes are placed before the big move starts.

I don’t think this is anything we should be concerned too much about, but I think it is an interesting thing worth noticing.

So, what happened here was that buyers were building up their buying positions (around 3327.00). It took them around half a day. Than they started placing aggressive buy market orders which started to push the price upwards into the trend.

When the price gets back to this level again, I expect that those strong buyers who initiated this whole buying activity will become active again and that they will try and push the price upwards from this level again.

That’s how I currently see the ES.

I hope you guys liked the analysis. Feel free to leave a comment below.

Happy trading!

-Dale

New trading opportunities on AUD related pairs

There was significant macro news concerning the AUD released on Tuesday. It was the AUD Cash Rate and RBA Rate Statement. This macro affected all the AUD related forex pairs.

Today, I would like to show you the AUD/JPY. In here, the macro completely changed the overall trend!

A change in sentiment

There was a downtrend and now the price has made a sharp rejection of lower prices. Aggressive buyers are currently pushing the price upwards.

You can see this nicely on a Daily AUD/JPY chart:

If you switch from Daily time frame to 30 Minute time frame, then you can start looking for some intraday buying opportunities, to participate in the current buying activity.

Best way to do so, is to use the Flexible Volume Profile to identify significant heavy volume areas.

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The picture below shows what the Volume Profile in this area looks like.

It reveals two heavy volume zones. First is around 73.74, and the second is around 72.72

Support around 72.72

What happened here is that buyers were accumulating their buying positions in the lower area (around 72.72).

Then there was the macro news and those buyers started buying again, but this time much more aggressively.

This started to drive the price upwards.

When the price makes it back to this area sometime in the future (this can take a while but we can wait), then I expect those buyers will become active again, and they will try and push the price upwards again. At least temporarily.

This could create a nice buying opportunity.

Support around 73.74

The other significant volume area the Flexible Volume Profile shows is a Volume Cluster, created around 73.74.

This one was created by buyers who were adding to their buying positions.

As you can see, the price stopped for a while to rotate. This Volume Cluster was created within a rotation.

The buyers used the rotation to add some more to their buying positions. When they did so, they started pushing the price upwards again. This is the buying activity we see right now.

What I expect to happen is this: When the price makes a pullback to this Volume Cluster again, those buyers who were adding to their buying positions there (around 73.74) will try and push the price upwards again. They will do so, because they will try to defend their long positions.

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How the sellers will react

Also, sellers will be cautious when those two heavy volume areas get hit again. The reason is that they will know there were aggressive buyers there. They won’t care too much to risk a potential fight with them.

So, it is likely that sellers will get rid of their short positions when the price re-visits those areas again.

How does a seller get rid of a short position? He buys!

This helps the buyers push the price upwards again.

More opportunities

There are currently more trading opportunities like this on some other AUD related forex pairs. All thanks to the RBA macro news.

They are not too hard to find (well, you need to have Volume Profile, otherwise they ARE hard to find). So maybe you could give it a try and find some more yourself!

P.S. The setups I used today are described more in detail in this FREE Volume Profile webinar:

Volume Profile setups webinar

Happy trading!

-Dale