A big month for stock traders…… and with the Santa Claus rally as well

A big month for stock traders…… and with the Santa Claus rally as well

It’s going to be an interesting end to the year for stock traders and investors and not just because of the Santa Claus rally. There are plenty of other events which are likely to make December one of the most interesting ends to a trading year for some time.

00:00

Introduction and webinar overview

00:00

The webinar begins with a welcome to attendees from the UK, North America, and other parts of the world. The focus will be on the North American market, primarily the U.S., examining various indices and stocks. The presenter notes it’s the first day of the new month and highlights the many topics and charts to be discussed. A standard disclaimer about the risks of trading and the importance of only using money one can afford to lose is also given before starting the analysis.

01:01

Volume Price Analysis basics

01:01

The speaker explains volume price analysis (VPA), which examines price action alongside volume to determine whether price movements on charts are genuine. VPA incorporates support and resistance levels, important candles, and candle patterns rather than bars. It also considers multiple time frames and non-time-based charts like Renko, which lack volume but retain other VPA elements to identify key signals and chart setups.

02:04

The discussion highlights a companion book on VPA containing over 200 examples across stocks, indices, commodities, and forex. The speaker addresses questions about integrating VPA into trading strategies beyond the foundational concepts presented in the books. They describe the development of a more practical approach to applying VPA in trading tactics, responding to reader feedback and clarifying how to build on the basics.

03:10

The speaker elaborates on enhancing VPA with additional tools, such as moving averages and fractals, although preferences differ among traders. Proprietary indicators have also been developed to support various elements of VPA. Understanding chart structure is crucial to selecting the appropriate indicators. For example, moving averages are useful in trending markets but less so during congestion phases, where VPA provides a stronger foundation for analysis and decision-making.

04:55

Support and resistance concepts

04:55

The discussion focuses on support and resistance levels observed over recent sessions, primarily from a price-based perspective. Various methods to identify these levels are explained, including the use of Fibonacci retracements, manually drawn lines, trend lines, and Andrew’s pitchfork. Additionally, the concept of analyzing support and resistance through volume is introduced, specifically using a method called volume at price, which shows how volume is distributed across different price levels on the chart.

06:00

Volume Point of Control explained

06:00

The speaker explains the concept of the volume point of control, represented by a yellow hatch line on the chart, which marks the area with the highest transacted volume, called the fulcrum of the market. This zone is crucial as it often represents congestion phases where trends begin. During market open, a surge of activity acts as a catalyst, causing volatile price reactions and increased participation, but the price may not move firmly in one direction around this level.

07:06

The discussion highlights common market traps at session crossovers, such as sudden volatility spikes followed by rapid reversals. The speaker notes how these patterns have become more pronounced, especially with the Wall Street open impacting global markets more than before. Unlike in the past when Globex trading was quieter, today’s day traders often see significant moves occur before Wall Street officially opens, with Wall Street continuing the trend amid broader U.S. market influences.

08:17

Fundamental and geopolitical impacts

08:17

The speaker emphasizes that day traders must be highly aware of multiple market drivers beyond just chart analysis. They highlight the importance of fundamental releases, such as economic data like the ISM report, which all traders should consider regardless of their time frame. Additionally, the speaker notes the increasing significance of political factors and government fiscal policies, which interact with central bank actions and broader economic conditions. This multifaceted approach is referred to as a ‘three-dimensional’ method in forex trading, incorporating technical, fundamental, and related market factors. The speaker suggests that a similar expanded perspective is necessary for day trading stocks and indices to move beyond solely chart-focused analysis.

10:19

Market trends and key levels

10:19

The speaker discusses the key 30,000 level for the Dow and YM, highlighting its significance as the high of a volatility candle. This type of candle creates significant highs and lows as price retraces within its range before deciding direction. The market is currently in a trend, moving away from the volume point of control (VPOC), which acts as a fulcrum in volume profile analysis. The VPOC identifies low and high volume nodes, indicating areas of little resistance or congestion, respectively, helping to determine the strength of support and resistance levels.

11:27

Using volume analysis and the accumulation distribution indicator, the speaker explains that low volume nodes allow price to move quickly through them, while high volume nodes cause slower movement due to congestion. The market is at an all-time high, and the next target levels are identified using price-based support and resistance methods like Camarilla pivots on the daily chart. Despite a recent pullback and profit taking, the market sentiment remains positive, supported by higher highs and higher lows on the five-minute chart.

13:28

The price is approaching a low volume node, indicating potential for quick upward movement. Additional indicators show bands forming around volume extremes, providing a support platform but no clear resistance yet. From a volume perspective, the market appears poised to push higher, testing the 30,000 level. The speaker emphasizes the importance of following market momentum, rather than opposing the broader market sentiment, for successful trading.

14:36

The discussion shifts to broader market influences, including Federal Reserve programs and political testimony related to economic support measures. These interventions can cause sudden market reactions. Upcoming economic events and speeches from key figures are noted as important for traders to monitor. The speaker highlights the significance of December, with key dates to watch, especially the 14th, framing it as a critical period for market participants to consider in their strategies.

16:59

Important upcoming dates and events

16:59

The speaker discusses the potential impact of the electoral college declaring Biden as president, emphasizing that this would confirm Janet Yellen as Treasury Secretary and likely lead to increased stimulus programs. Attention is also drawn to the upcoming FOMC meeting, which is significant as it follows the presidential declaration and could influence market rallies toward the end of the year. Prior to the FOMC meeting, the important Non-Farm Payroll (NFP) report will be released, which is a key economic indicator closely watched by the markets.

18:00

The NFP report has become the most closely watched economic release, especially since the pandemic started. Before the pandemic, employment data was less impactful as the Federal Reserve’s targets were being met and the labor market was stable. However, the current labor market distortions caused by the pandemic have elevated the importance of the NFP report. The speaker attempts to illustrate this by referencing employment data trends from 2017 to 2020, showing how the pandemic drastically altered labor market conditions.

19:06

Data shows the labor market was relatively stable until early 2020 when the pandemic caused a massive job loss of around 20 million in May. The upcoming NFP number is crucial for market sentiment and stock market direction. Importantly, the speaker notes a counterintuitive effect: poor employment numbers might actually boost markets because they signal a need for more stimulus, which investors like. Conversely, strong employment data could reduce stimulus expectations, affecting markets differently.

20:05

The segment concludes by highlighting the complexity of interpreting fundamental economic data like the NFP report, where market reactions may not always align with intuitive expectations. The speaker then transitions to discussing market sentiment indicators, mentioning the VIX, indicating a shift to analyzing volatility and investor sentiment in the next discussion.

20:35

VIX and options market insights

20:35

The VIX index is a crucial benchmark for market sentiment, especially related to the S&P 500. Despite recent declines following vaccine developments and the election, the VIX remains lower than expected given current equity market conditions. This suggests a need for additional economic stimulus and signals for policymakers like Jerome Powell to take further action. The discussion also introduces plans to analyze option markets more deeply next year to better understand day trading dynamics.

22:19

There has been a significant increase in call options trading on major stocks, particularly large tech companies like Apple and other FANG stocks. Retail traders and large investors such as SoftBank have driven this surge, impacting stock prices and market movements. Options provide a way to trade expensive stocks more affordably and influence the interaction between cash and options markets. Upcoming market events include the 21st of December, notably important for Tesla as it will be added to the S&P index on that day.

24:01

Tesla addition to S&P 500

24:01

Tesla is set to be added to the S&P 500 index on December 21st, replacing another company. This inclusion is significant because Tesla will become the seventh largest company in the index, impacting fund managers who will need to rebalance their portfolios by selling some stocks to accommodate Tesla. Despite the positive news, the addition may cause volatility, and history shows that stocks added to the index can sometimes drop sharply, as was the case with Facebook.

25:08

Tesla’s entry into the S&P 500 is notable as it will be the largest company to join since Berkshire Hathaway in 2010, making a big impact on the index. The event coincides with other notable dates, including the solstice, emphasizing the importance of December 21st for investors. The segment highlights the scale of Tesla’s market capitalization and its potential influence on the market.

26:16

At the start of the year, Tesla was the most shorted stock in the US, heavily targeted by institutional investors skeptical of the company’s profitability and future. Many short positions have since been wiped out due to Tesla’s rapid rise. The discussion touches on the emotional and opinion-driven nature of short selling against Tesla, with some viewing the company as a hype-driven stock.

27:30

The speaker explains the importance of monitoring heavily shorted stocks as they often experience short squeezes, creating rapid price movements. For day traders, this presents opportunities to capitalize on these quick rallies without holding the stock long term. The segment also introduces the value of understanding stock float, relative volume, and short interest data to gain an edge in trading decisions.

29:05

Combining short interest data with technical indicators such as price and volume-based support and resistance levels can improve a trader’s understanding of potential entry points and price direction. This integrated approach helps traders anticipate where a stock might move next, enhancing decision-making in fast-moving markets.

29:36

The speaker reflects on the complexity of modern trading compared to the past, emphasizing the need to synthesize various data sources and consider broader economic and geopolitical factors. The process requires thorough research and awareness beyond just technical analysis, highlighting the evolution of trading in today’s environment.

30:42

The presentation transitions to a colleague named David, who will analyze current price action and market charts. The focus shifts away from Tesla to other market instruments like the YM futures, noting that much of the recent upward movement has already occurred in the Globex session.

31:12

Stock price action analysis

31:12

The presenter introduces the powerful capabilities of the TradeStation platform, highlighting its ability to display thousands of charts simultaneously, which is beneficial for scanning large stock databases. As an example, Apple stock on a three-minute chart is analyzed to demonstrate that the same principles of price action and volume analysis apply universally across different stocks and timeframes.

32:15

The discussion focuses on Apple’s recent price action, noting a rally followed by signs of weakness as volume declines, indicating a potential reversal. The presenter explains that rising volume during the decline signals selling pressure. They emphasize the importance of understanding price action combined with volume analysis to interpret market trends, illustrated by the transition from bullish to bearish signals on the chart.

33:09

The presenter examines potential support levels for Apple’s price decline using volume profile and accumulation/distribution indicators. They identify low volume nodes that suggest rapid price movement through those areas and highlight stronger volume clusters that could act as support zones. The analysis suggests a likely fast drop to the first support level followed by possible congestion and oscillation around subsequent support levels.

34:12

Further analysis of Apple’s support zones continues, emphasizing the strength of certain volume clusters as potential price floors. The presenter briefly shifts focus to other stocks, including Nvidia, which is currently shorted, and Microsoft, which is trading sideways around a strong volume point of control. This segment underscores the utility of volume-based support and resistance levels for identifying trading opportunities and managing risk.

35:12

Microsoft’s price action is discussed in more detail, highlighting how its accumulation/distribution levels create clear floors and ceilings that strengthen with repeated tests. This setup offers traders well-defined entry points, stop-loss placement, and protection corridors to manage risk effectively. The presenter praises this method for simplifying trade management and reducing the complexity of stop-loss decisions.

36:09

Additional stocks such as GE and Goodyear are briefly reviewed, noting their current lack of momentum or range-bound behavior compared to previous highs. The presenter then shifts focus to a live feed of Powell and Luncheon testifying, humorously commenting on Powell’s informal appearance and surroundings during the testimony.

37:15

Dollar index and market volatility

37:15

The speaker discusses the current state of the dollar index, showing bearish trends with significant volatility. Despite this, equities should be benefiting. The VIX index remains elevated around 20.6, which is unusual given the recent market gains, as it should typically be closer to 10 or 11. The volatility is causing oscillations and uncertainty in the market.

38:17

Analyzing multiple indices (YM, NQ, ES) on five-minute charts reveals heavy volatility with volume concentrated around key control points, indicating oscillating market behavior. The speaker emphasizes the challenge of trading in such conditions, suggesting traders either stay out or use faster time frames to react quickly to sudden changes triggered by speeches or announcements.

39:24

The speaker recommends moving to sub-one-minute charts to trade more nimbly during volatile periods. They highlight that trades are available in this environment, with price action moving near key volume points. Using trend monitors can help identify potential changes in market sentiment, especially as price enters congestion zones, signaling when to expect reversals or continuations.

40:15

Trend monitors show initial resistance to change but eventually signal potential reversals as price breaks out of congestion areas. The VIX remains slightly elevated and is trading within volatility candles, while the dollar index is still falling with signs of possible retracement. The overall strategy is to make quick trades capturing small moves rather than holding positions for extended periods.

41:17

The approach is to enter and exit trades rapidly, capturing short-term points rather than long holds. The trend monitor’s color shifts indicate evolving trend strength, moving from shorter to longer time frames if momentum builds. However, volume trends are weak, with prices rising but volume falling, suggesting the current move lacks strong support and may be anomalous.

42:10

Volume and trend relationships

42:10

The speaker explains the relationship between individual candles and volume bars, emphasizing the importance of analyzing groups of these elements to see overall market trends. They highlight that a rising market on falling volume indicates weakness because strong trends require rising volume, whether going up or down. This is unlike natural gravity, as market movements require effort reflected by volume.

43:16

The discussion continues around volume point of control (VPOC) and price resistance. Large volumes above the current price create resistance, making upward movement difficult. Below price, there is a strong support platform tested multiple times. The speaker notes the importance of these levels acting as barriers to price reversals and highlights minor resistance levels that are less significant.

44:13

Recent candles show some selling pressure and price reversals near the volume point of control. The market remains congested around this key volume area, and until there is a breakout with significant volume, the price is likely to stay range-bound. The speaker monitors the right-hand side of the chart for further clues.

44:43

Market updates include a falling US dollar and a relatively stable VIX index. The dollar decline suggests some strong trades in major currencies, but overall market congestion is evident with the volume point of control centered on all charts. The speaker advises patience as the market remains range-bound on the one-minute timeframe.

45:23

The market is trading in a narrow range with no clear direction, emphasizing the need for patience or quick trades on fast charts using volume signals. Some selling is observed in recent candles, but buyers are still present. Volume patterns indicate ongoing battles between buyers and sellers without a decisive move.

46:23

Resistance levels overhead are significant and tested multiple times, making upward moves difficult without strong volume. A spike in volume on a recent candle suggests potential congestion rather than a breakout. The market is likely to continue sideways or experience some selling pressure due to weak buyer follow-through.

47:24

The market shows a lack of strong buying momentum and continued sideways movement. Selling pressure is present but not overwhelming, resulting in a cautious trading environment. The speaker suggests looking at other instruments for further insight.

48:01

Reviewing Apple stock, the speaker notes a minor rally followed by small selling candles with decreasing volume, indicating weak selling pressure. This could signal a potential continuation of the upward trend. The falling dollar supports bullish prospects. The segment ends with a transition to analyzing the YM futures on Renko charts.

49:07

Renko chart and momentum analysis

49:07

The speaker explains the use of both time-based and non-time-based Renko charts, highlighting their powerful combination. They describe how the Renko optimizer indicator automatically determines the optimal brick size for different time frames, such as 15 seconds, 30 seconds, and one minute, based on market momentum. For example, on the YM futures, the optimal brick size is currently eight points, which adjusts dynamically rather than being arbitrarily chosen.

50:25

The Renko optimizer indicator adjusts brick sizes according to market momentum, ensuring that traders use the most suitable brick size for the session. This approach eliminates guesswork by basing the brick size on real-time market conditions. The speaker emphasizes that Renko charts are momentum-based, not time-dependent, and can be combined with volume price analysis (VPA) and other indicators for a comprehensive trading view.

51:51

Renko bricks form based on price movement rather than time, with each brick created after a set number of points move through the market. This independence from time allows traders to choose larger bricks for slower time frames or smaller bricks for faster ones, offering flexibility. The speaker notes that while users can manually set brick sizes, most prefer using the optimizer to automatically calculate the optimal bricks, which must be updated regularly depending on the chart speed.

52:58

The speaker discusses additional tools like the trend monitor and trend dots, which provide detailed insights into price action and trend direction. By using these tools alongside both time-based and Renko charts, traders can observe trends developing across multiple time frames. An example is shown on TradingView with various time frames illustrating a downward trend, demonstrating how these combined indicators enhance market analysis.

54:00

Oil and gold market updates

54:00

The VIX is currently showing sideways, choppy price action, indicating market indecision. The speaker emphasizes patience while waiting for trading opportunities, focusing on high or low volume candles which signal potential buy, sell, or trap moves. Using a five-minute chart, they highlight volatility triggers and expect congestion or sideways trading before a possible reversal. Volume plays a crucial role in identifying these setups.

55:27

The discussion shifts to gold, which has been under pressure but is trying to rally, and then to currency futures such as the Aussie dollar, Pound, CAD, Euro, Yen, and New Zealand dollar. The speaker explains the importance of accumulation and distribution indicators that identify very precise, strong support and resistance levels down to the nearest pip. These clustered levels form powerful platforms that define stop loss placement and offer protection against retracements.

57:26

Using the currency strength indicator, the speaker notes significant selling pressure on the Yen and a strong rally in the Euro, with the US dollar weakening. The market sentiment is reflected in 15-minute charts showing sideways price action, indicating patience is required. A key volume point of control level has been breached, which now acts as support, suggesting potential upside momentum as buying emerges to counteract selling.

59:18

Volume analysis shows a relatively weak push upward, with price expected to move quickly through low volume regions but facing resistance near higher volume zones. The VIX is declining, supporting a bullish trend transition from bearish to a more relaxed upward movement on the five-minute timeframe. Price-based resistance and support levels are influencing the market, with expectations for congestion around certain volume levels before a possible breakout.

01:00:54

The speaker concludes by noting available trading indicators on platforms like QuantumTrading, NinjaTrader, and TradingView, with TradeStation support forthcoming. They mention upcoming exclusive webinars focused on stocks using TradeStation’s RadarScreen and the integration of currency futures trading via TradeStation Global linked to Interactive Brokers, highlighting the platform’s expanding capabilities for traders.

01:02:00

Trading platforms and education programs

01:02:00

The TradeStation platform is powerful, and upcoming updates will bring additional indicators to TradingView, which were previously unavailable due to scripting limitations. Customers who have purchased the TradingView package will receive these new indicators for free. This policy extends to all full package investors, who will get all future indicators without additional charges, a rare practice in the industry.

01:02:51

The complete forex trading program has become a comprehensive and successful educational offering. Students enrolled in this program can also join a funded account initiative, where they can trade with accounts ranging from $5,000 to $2 million, depending on the level they choose. This funded program includes profit kickbacks, allowing students to earn while leveraging their trading knowledge. The program is exclusive to students to ensure they have the best education before accessing these funding opportunities.

01:04:26

Funded trading accounts and closing remarks

01:04:26

The speaker explains the benefits of trading with a funded account, emphasizing that traders use someone else’s money with no personal financial risk. They highlight the simplicity and safety of the program and direct viewers to a website for more details. Additionally, they mention Anna’s site, annacooling.com, where books and weekly analyses are available in both Kindle and paperback formats. The session concludes with thanks to the audience, information about upcoming webinars including a new series starting in January, and a reminder about the next London Forex session scheduled for 7:45 UK time next Tuesday. The speaker wishes everyone a safe and successful trading week.

By Anna Coulling – creator of volume price analysis