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S&P 500: Volume Profile And Price Action Analysis

 

Trader Dale - Free Book

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

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