Video Transcript:
Hello, everyone, it’s Dale here. Today, I’d like to do an analysis of USD/CAD (US Dollar/Canadian Dollar). What you see before you is the NinjaTrader 8 platform with my custom-made Volume Profile and VWAP indicators. This is USD/CAD, and you’re looking at a 30-minute chart. I’d like to talk about this newly formed support, which is at 1.3576.
This support is based on a couple of things. The most important, I would say, is the Volume Profile. If I use the Volume Profile like this, it shows that there was a strong heavy volume zone, followed by very strong and aggressive buying activity. This is one of my Volume Profile setups, which I call the Volume Accumulation Setup. Basically, it shows a heavy volume zone where large trading institutions were active, and then it shows the trend where those institutions pushed the price after they accumulated their positions. This is how the setup is supposed to look. I like to trade from the beginning of that heavy volume zone, which in this case is this level. So, that’s basically the Volume Accumulation Setup.
The idea behind this is that once the price pulls back to this level, there’s a good chance the buyers from this area will want to defend the level. Clearly, it’s important for them since they placed many long positions here, and they’ll want to defend the area and push the price upwards again.
Additionally, if you look here, this is also the beginning of a fair value gap. If you’re familiar with Smart Money Concepts, you know this is a fair value gap. This is the bottom of that gap, and it significantly adds strength to the level. So, if the price comes to the bottom of the fair value gap, there’s a high chance of a reaction.
Another factor adding strength to this level is that the price has bounced around this level multiple times—in here, here, here, and here. While not exactly at the level, it’s in that general area, which means that in the past, it acted as resistance. Now, when the price broke past that resistance, it turned into new support.
For all these reasons, I believe this is a strong level to trade from. One more thing to note is the VWAP line (the weekly VWAP) is quite close to our level. If VWAP remains near this level at the time of the pullback, that would be ideal, as it would add further strength.
So, for all these reasons, I think this is a strong level to trade from. Now, what we need to do is wait for the pullback, and once the price reaches this level, I’ll take it from there.
One thing I often mention in our live trading room is that you want to watch out for weak highs and weak lows. The risk with this trade is that there is a weak low below our level. A weak low means there wasn’t a strong rejection of lower prices that cleared out liquidity; instead, there’s just this shy, weak low, and the price often likes to test it. The risk is that when the price comes close to this weak low, it may dip below to test for liquidity and take out any liquidity sitting beneath it.
On the other hand, there’s also a weak high here—a failed auction, which works similarly to a weak low. When the price comes near this level, it often likes to test it. So, we have a weak high (a failed auction) and a weak low, both of which should attract the price if it gets close.
I wouldn’t be surprised if the price made a pullback to this level, reacted, and eventually moved past that failed auction. In an ideal scenario, the price would reach the level, react, and move upward, with the second take profit just above the failed auction (the first take profit would be sooner).
Keep in mind there is strong macro news today, specifically inflation data on the US Dollar, which could trigger significant volatility in the markets, especially in pairs like USD/CAD. If this level gets hit during the macro news or post-news volatility, I won’t be trading it, as it would be extremely risky. One possible scenario is that during the news, the level gets hit, and the liquidity below this weak low gets taken out. That’s one potential outcome. The ideal scenario would be for the price to hit the level before the news, exit the trade before the news, and then not worry about the news afterward. That would be ideal.
Let’s see how it plays out. If you’re interested in learning more about Volume Profile, VWAP, or Order Flow trading, head over to my website at Trader-Dale.com. If you click this button, it will take you to the page where you can browse my trading education and tools. Here, you’ll find the Volume Profile pack, which will teach you everything about Volume Profile trading and provide you with my custom-made Volume Profile and VWAP indicators. Below that is the Order Flow pack, which focuses on day trading with Order Flow, and it will teach you everything you need to know about Order Flow trading while providing you with my custom-made Order Flow and Volume Profile indicators.
That’s about it. Thanks for watching the video, and I’ll look forward to seeing you next time. Until then, happy trading!
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