Trading Failed Breakouts at VWAP – ES Futures Trade from Our Live Room

All right, quick follow-up here from our morning session. We came in this morning looking at these two levels — the overnight high and the overnight low. What we were looking for was either a break to the upside that holds, a break to the downside that holds, or the inverse — a failed breakout or a failed breakdown. During our session this morning, it didn’t exactly materialize within that time frame, but here you can see we did have a break right off the open on very weak buying. Buyers came in, closed, and held, but there was no follow-through and no acceleration of buyers on this breakout. At that moment, I chose not to do anything. We then oscillated a bit and rolled back downhill. We had a failed breakdown right at VWAP, caught into this passive trend stream, and into our bullish-above level, re-hitting it by the tick, and then rallying back up to this swing high for about a 15-point run.

Let’s take a look at that on the order flow chart. Here’s the opening candle — negative 2,113 on very weak buying. There was a little absorption here, but you’re going to have some of that right off the open with wild orders coming through. We held and broke above, closing with a fairly weak delta for a 10-minute candle at 647. Then we saw deceleration of buyers as we tagged 6,400, followed by a small burst to target one and the weekly POC at 6,406, after which we started oscillating.

Meanwhile, off the open, recall we had a massive divergence between price and delta — price moving up while delta fell off a cliff. This often leads to weak or fake moves to the upside, and the inverse is true on the downside. As we moved up, there was a bit of initiation, but still not a very powerful candle, even though the size was decent. The move up felt more like a squeeze. We topped out, rolled back downhill a bit, and formed a bull flag wedge.

Here are the two key candles — right at VWAP and at our bullish break level of 6,390. We broke and closed below VWAP very briefly, then the next candle absorbed nearly all of the sell-off. We had initiation with a double-stack buying imbalance right at the VWAP break, then closed above. A buy stop was triggered above, and we ran all the way up to tag our target — the swing high just above the POC — about 30 minutes later. That was a 15-point run, exactly the move we were looking for in the morning session, but it just didn’t happen within that time frame. This was the follow-up.

Hey everyone, it’s Dale here. I hope you enjoyed the video. If you’d like to trade alongside me and our team of prop firm-funded traders every day, click the link below the video and hop aboard. We’re looking forward to trading with you.