Video Transcript:
Hello everyone, it’s Dale here with new day trading analysis. Today, I’d like to talk about the ES, which is the futures for the Standard & Poor’s 500 Index. This is the ES 15-minute chart, but let me actually switch to the 30-minute chart, which is my favorite for day trading analysis. So, this is the 30-minute chart here, and I want to talk about a level that has recently formed. The level is at 5618.5, and it is a support level. Let me show you the reasoning behind this support.
Currently, on the ES, there is a strong uptrend, and I’m looking to trade mostly longs because of this strong uptrend. This particular long trade is based on a heavy volume zone within this uptrend area. As you can see, I moved the Volume Profile over that recent uptrend area, and right here, there is a significant volume cluster. This indicates that buyers who were pushing the price upwards in this uptrend were active here, adding to their long positions, and then continued to push the price even higher. So, this is an important place for buyers, and if there’s a pullback, chances are that the buyers from here will become active and push the price upward from there.
I’m trading from the beginning of that heavy volume cluster because, in my experience, that’s where I have the best chance of catching the trade and the best chance of a strong reaction. That’s why I’m trading from the top of that volume cluster.
Apart from the Volume Profile setup here, there’s also one additional thing that I really like about this trade. It’s the aggressive buying activity that starts from this heavy volume zone. This buying activity shows us that buyers were very aggressive here, pushing the price aggressively upwards, which demonstrates the determination and strength of the buyers. By the way, this three-candle formation—those three candles—form something called a Fair Value Gap. This is a concept from Smart Money, and for a long trade scenario, you want to see three candles in this formation. The high of the first candle and the low of the third candle should have a gap between them, meaning they shouldn’t overlap. If they do overlap, then it wouldn’t be a Fair Value Gap because there wouldn’t be any space between the wick of the first candle and the wick of the third candle. But if they don’t overlap, then this is the Fair Value Gap, and I like to trade from the bottom of the Fair Value Gap, initiating a long trade from here. So, this is the Fair Value Gap long trade scenario.
As you can see, this is it—this is the Fair Value Gap. This is the bottom of it, and that’s our level. So, that’s another tool I like to use in my trading. The Fair Value Gap represents aggressive buyers in this case because we are in an uptrend, so those are aggressive buyers. Combine that with the heavy volume zone, and you have a nice, strong level to trade from.
Additionally, we have the first deviation of the weekly VWAP in this area—this gray line. It’s still around our level, which is good, as it adds strength to the level. If there’s a pullback right now, I would still consider the first deviation as something that adds strength to the level. However, if the first deviation continues moving upwards as the price and volumes shift upwards, then it might not confirm and add strength to the level anymore. But I would still consider this level strong, even if the first deviation wasn’t there, and I would still be willing to trade it.
So, currently, I’m just waiting for that pullback. If it occurs, I’ll open the Order Flow software around this zone, wait for confirmation, and use the Order Flow to better time my trade entries and exits, and then go long from there. If you guys don’t have Order Flow, you can just enter at the first touch of this level—chances are there will be a reaction.
If you’re interested in learning more about Volume Profile, Order Flow, and VWAP trading, then head over to my website at Trader-Dale.com. If you click the button that says “Trading Course and Tools” it will take you to a page where you can browse my trading education and custom-made trading indicators. There are three big packs: the first one is called the Volume Profile Pack, which will teach you everything about Volume Profile trading; the second one is the Order Flow Pack, which focuses on day trading with Order Flow; and the third and newest one is called the VWAP Pack, which focuses on trading with VWAP. If you’d like to get all these packs in one big bundle, scroll down a bit, and you can get all three together at a discounted price. If you’re only interested in the Volume Profile and Order Flow packs, you can get them together in one pack as well.
Alright, that’s about it. Thanks for watching the video; I hope you found it useful. I look forward to seeing you next time, and until then, happy trading!
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