Seeking out fallen angel stocks and how to analyze them using volume price analysis

Seeking Out Fallen Angel Stocks And How To Analyse Them Using Volume Price Analysis.

00:00

Introduction and trading disclaimer

00:00

The session begins with a welcome and an important disclaimer about the risks of trading, emphasizing not to invest money one cannot afford to lose. The presenter notes the diversity of attendees, including forex program students and quantum trading users, and introduces the focus of the session: examining the futures market, particularly indices and some stocks. The analysis will utilize the VPA methodology, which combines price action and volume.

01:06

Volume Price Analysis (VPA) methodology overview

01:06

The speaker emphasizes the importance of understanding the relationship between volume and price to predict market movements. They reference a key resource, ‘A Complete Guide to Volume Price Analysis,’ and its companion book containing over 200 chart examples from various markets including indices, stocks, commodities, and forex. These examples illustrate important chart points called ‘signals,’ which are not definitive but serve as prompts to pay attention to potential market reversals or significant changes. The concept of volume price analysis (VPA) is noted to be applicable across different time frames and markets, including cryptocurrency like Bitcoin.

02:52

Bitcoin price action and market patterns

02:52

The speaker discusses Bitcoin’s price movement around the 29,000 to 30,000 level, noting that it has been in congestion since mid-May following a strong sell-off and subsequent volatility. They emphasize the importance of understanding price action, chart structure, and recurring market patterns. The speaker acknowledges the difficulty of patience in trading but highlights that the chart patterns observed in Bitcoin, stocks, or indexes tend to repeat across different markets and contexts. They also mention the value of mastering volume price analysis (VPA) concepts for lifelong trading insights.

04:03

Trading vs investing and VPA elements

04:03

The speaker explains that the core principles of Volume Price Analysis (VPA) apply to both trading and investing, with the main difference being the duration of market exposure. VPA is based on volume, price action, candlestick patterns, and support and resistance levels. Support and resistance are critical, as they indicate where price may pause or reverse. These zones evolve into supply and demand areas, reflecting typical market behavior where price trends pause, reverse, or continue. Understanding these elements helps traders and investors interpret market movements more effectively.

05:52

VPA helps identify where the price currently stands in its market journey, offering clarity that many traders find transformational. The speaker notes receiving hundreds of emails from traders who say applying VPA changes their market perspective and improves their results. This approach forms the foundation of understanding price action, chart structure, and patterns. On top of this foundation, traders can add any indicators they prefer, including proprietary or standard ones.

07:06

The speaker describes their trading setup, which incorporates multiple time frames for a comprehensive view of the market. They use MT4 and TradingView platforms, with charts ranging from daily to 5-minute intervals, including a Renko chart which is non-time based. This setup is designed specifically for short-term trading and is separate from longer-term investing strategies, emphasizing the importance of using various chart types and time frames to inform trading decisions.

08:17

Multi-timeframe chart setup and volatility indicator

08:17

The speaker explains the concept of analyzing multiple time frames in trading, using the daily chart to understand slower trends that influence faster time frames. They introduce a volatility indicator developed as part of the quantum trading toolset, which signals momentum when price action moves outside the average true range, marked by purple arrows. The indicator also reflects volume activity beneath these movements. An example is given where buying late in a session led to a bullish engulfing pattern after a low, despite preceding down candles associated with FOMC-related volatility and rising volume. This illustrates how the indicator helps interpret market momentum and volume dynamics during significant events.

10:11

Market events impact and bond market signals

10:11

The market experienced heightened volatility due to quadruple witching on Friday and preceding comments from the Federal Open Market Committee (FOMC) about potential interest rate increases in 2023. Despite a recent market downturn, this is viewed as a shakeout rather than a long-term decline.

10:47

Although interest rates are expected to rise, there remains uncertainty due to possible deflation or stagflation scenarios. The bond market is critical in signaling future economic outcomes and should be closely monitored.

11:23

The bond yield curve, particularly between five- and thirty-year bonds, is unusually flat. This indicates that long-term interest rates are not rising as expected despite increased short-term rates, suggesting market skepticism about future economic risks.

11:57

Short-term interest rates are increasing, but long-term rates are declining, which contrasts with Federal Reserve intentions. Upcoming speeches from Fed officials this week will likely impact market direction significantly.

12:29

Following a strong trading day marked by a significant upward price move, volatility caused the market price to retrace within the previous day’s trading range. This retracement may lead to consolidation, reversal, or continuation of the prior trend.

13:05

Support, resistance, and volume point of control

13:05

The speaker explains the concept of the volume point of control on the daily chart, highlighting its role as a price-based support and resistance zone formed by significant volume over time. This area, also called the value area in market profile terms, represents a price range where congestion occurs and price tends to rotate. Although the price broke through this zone briefly, it snapped back and is expected to return to the volume point of control, which may act as a resistance cap or slow further upward movement unless driven by strong market events.

14:19

The hourly chart is discussed with reference to the Camarilla protocol for identifying price-based support and resistance. Current price action is described as sideways with volatility candles influencing movement. The importance of the high and low of volatility candles as potential key levels for price progression is emphasized. The third and fourth Camarilla levels on the hourly chart are noted as significant for the coming week, while lower timeframes refresh these levels daily.

15:33

On the 15-minute and 5-minute charts, typical opening volatility is observed with a surge in volume followed by price retreating into the volume point of control. There are attempts to sell off gains, but volatility returns price into the established spread. A hammer candle formation is noted, which bounces off the S2 support level and aligns with the outermost volume support, suggesting a potential support area at these lower timeframes.

16:09

Intraday chart signals and volume analysis

16:09

The segment discusses the volume point of control coinciding with price bases, highlighting a classic VPA (Volume Price Analysis) signal involving a hammer candle and support levels. Despite the price bouncing off support and moving higher, the volume beneath the candle does not show significant strength, indicating some uncertainty. A reversal candle with notable volume suggests potential encouragement, but the volume levels and price action signal underlying weakness.

17:16

The price struggles to sustain upward momentum, facing resistance and volume point of control at multiple levels. The speaker notes weakness indicated by upper wicks on up candles and declining volume, suggesting the bounce may not be strong. Using a non-time-based Renko chart, momentum appears weak compared to the previous day. The analysis shifts toward examining the fundamental news environment to understand market behavior.

18:33

The speaker reviews multiple economic calendars to track key events, focusing on speeches by Fed officials such as Williams. These comments are closely watched by markets and can quickly influence price movements. There is some inconsistency in calendar data, but live news feeds provide more timely updates. The importance of Federal Reserve communications in shaping market sentiment is emphasized.

19:41

Market indices show mixed performance with the Dow slightly down, the S&P slightly up, and the Nasdaq more positive. The Nasdaq’s 14,000 level is highlighted as a crucial support threshold for forming a strong platform. Attention is also given to the US 2000 index, which experienced volatility and retracement the previous day. The broader market is seen as unsettled, with a shakeout phase underway and the bond market serving as a gauge for overall sentiment.

20:54

The speaker advises combining fundamental awareness with VPA techniques on individual charts to navigate the current market environment. They transition to passing the analysis to a colleague, David, who will provide a more detailed look at indices using platforms like Ninja Trader and TradingView. Plans are shared to follow a selection of four stocks over subsequent sessions, including a focus on a trending ‘meme’ stock, Clover, chosen for its educational value.

22:25

The discussion concludes with an invitation to viewers to ask questions about VPA, indicators, or market conditions. The speaker reiterates that while there was a promising move based on a hammer candle and classic VPA signals, support and resistance levels, along with the volume point of control, remain critical elements for analysis. Emphasizing the importance of these tools, the segment encourages ongoing observation and learning.

23:03

Cryptocurrency strength indicator overview

23:03

The speaker introduces a new cryptocurrency strength indicator currently in development on TradingView. This indicator, inspired by the currency strength index (CSI), operates on a one-minute timeframe and compares Bitcoin against several cryptocurrencies, all measured against Tether (USDT), which is pegged to the US dollar.

23:34

The indicator includes multiple cryptocurrencies available on the TradingView platform, all compared against Tether. Users can customize their preferred cryptocurrencies. The tool is versatile and aims to provide real-time insights across various timeframes, similar in function to the currency strength indicator but focused on crypto pairs.

24:04

The cryptocurrency strength indicator is nearing launch and works across all timeframes. It applies principles like oversold conditions and trend strength with rising or falling lines. Unlike traditional currency strength indicators that track individual currencies, this tool compares crypto pairs, such as Bitcoin versus USDT, offering a fresh perspective on crypto market strength.

24:34

The indicator’s functionality is explained further, emphasizing its focus on crypto pairs rather than single currencies, while maintaining similar analytical principles. Users with the full TradingView package will receive this tool free upon release. The discussion then shifts to current market sentiment, noting that the British pound is rallying.

25:05

Current currency index trends show the Japanese yen falling, which is expected to support a gentle rise in stock indices. Concurrently, the US dollar index is also falling, reinforcing the positive sentiment for indices. These observations are based on a five-minute timeframe analysis of key currency indices, including the euro.

25:30

Major indices price action and volatility triggers

25:30

The market has been moving sideways for most of the day on the NinjaTrader platform, focusing on the three primary indices: YM, NQ, and ES. Volatility triggers are active on the day and daily charts for the ES and YM, but the NQ has not shown similar volatility or reflected recent major price movements. The NQ continues its steady bullish trend, seemingly unaffected by Federal Reserve statements or other external factors, highlighting a disconnection in market behavior.

26:40

Market participants are advised to pay attention to market reactions but maintain a realistic perspective, recognizing that recent volatility is likely driven by insiders and market makers aiming to reset the market trend. The speaker emphasizes that this manipulation presents trading opportunities but warns against buying into sensational predictions about major downturns based solely on interest rate forecasts.

27:37

Analysis of the YM index shows it is currently trading around the volume point of control, suggesting sideways price movement within the daily candle spread is likely. In contrast, the NQ presents a different scenario, requiring separate consideration to understand its price action dynamics.

28:04

Index resistance levels and trading outlook

28:04

The discussion focuses on breaking past the 14,200 level and the expectation of limited volume above that as the market enters new high ground. The ES index remains largely bullish despite a transitional color change and an engulfing candle pattern. Attention is given to the 4260 resistance area, with anticipation of a breakout. Volume patterns on the YM and NQ indices are analyzed, explaining that volume falling after the open is normal and not indicative of weakness.

29:02

The speaker highlights a well-defined resistance level on the NQ, shown by the accumulation distribution indicator, which graphically represents strong support and resistance levels through line thickness. Testing of this resistance multiple times suggests a potential breakout if a solid close above it occurs. The current volume profile shows volume falling away at the volume point of control, supporting a positive outlook. The ideal scenario involves a steady candle close without large wicks, signaling strength above resistance.

30:25

Further positive momentum is noted as both the yen and the dollar weaken, potentially aiding a push through resistance into a low-volume area, which could present a buying opportunity. Multiple time frames on the YM are reviewed, ranging from 15 seconds to 15 minutes. The volume point of control remains a key level, indicating strong price-based resistance that could limit the upward movement of any trade initiated at this point.

31:29

Multiple timeframe volume analysis for trades

31:29

The speaker discusses the challenge of breaking through strong resistance levels in a market chart, noting the heavy headwind currently acting against the market. Using a 15-second time frame example with the YM September contract, they explain how indicators and principles apply consistently across different time frames. They highlight a strong resistance level marked by a blue dashed line, which, if broken, would become support, and emphasize the importance of volume behavior in confirming market moves.

33:10

The analysis focuses on recent candle activity where price rises are accompanied by falling volume, signaling potential weakness. The speaker explains that ideally, volume should increase alongside price in a strong trend. Although the current volume pattern suggests some caution, it does not necessarily indicate an immediate trend reversal, but rather a sign of weakening momentum within the ongoing trend.

34:14

The speaker points out the presence of a strong support platform below current price levels, which has been tested recently and held firm. They mention lively discussion in the volume price analysis (VPA) chat and note encouraging volume on recent candles that may support further upward movement. The overall tone suggests cautious optimism with some emerging strength despite earlier volume concerns.

34:50

Switching to a one-minute time frame, the speaker identifies a solid platform of support and notes an upcoming low volume area that could facilitate easier price movement. The trend monitor remains positive (blue), indicating a supportive environment for the current upward trend and a favorable setup for a potential push higher.

35:16

On the three-minute chart, the market is observed to be moving into another low volume region with some price-based resistance levels ahead, the strongest around 33,800. There is a cluster of resistance that may impact the price trajectory, but overall volume is lower in this region, which could help price progress if volume builds appropriately.

35:46

The speaker continues examining volume patterns, noting that volume falls away in the current region, which is generally favorable for price movement. If volume increases under the price as it moves upward, there is potential to reach the next resistance level. This analysis suggests a cautious but positive outlook based on volume trends.

36:13

Looking at higher time frames like the five and ten-minute charts, very strong resistance levels are identified, with some low volume zones that could allow easier upward price movement once breached. The speaker then shifts to addressing a question about trading indices, mentioning the three main indices: ES (S&P 500), YM (Dow Jones), and another not specified in the excerpt, setting up for further discussion on index trading basics.

36:55

Choosing an index for trading beginners

36:55

The speaker discusses popular stock indexes for trading, mentioning the Nasdaq, Russell (possibly the RUT), and the Dow Jones Industrial Average (YM). They note that the YM, focusing on 30 large stocks, is a preferred starting point for beginners and is primarily traded by David. The YM futures are straightforward, with one index point equal to four points in value, making it accessible. Many brokers, including those offering MT4 and MT5 platforms, provide versions of these index futures, making it less intimidating compared to starting directly with futures trading.

38:09

Stock selection using Finviz and volume filters

38:09

The speaker introduces Finviz as a useful free tool for stock selection, discussing various filters and criteria to identify stocks. They mention working through different methods and highlight that using volume as a filter seems to work well.

38:47

The speaker explains their current use of volume as a filter on Finviz, setting a threshold of over two million traded shares to exclude smaller, less relevant stocks. This approach simplifies the selection process and reduces the number of stocks to review.

39:24

The speaker describes how Finviz displays stocks alphabetically and introduces a new feature showing stocks as bubbles. These visual bubbles help users assess chart shapes and patterns quickly, aiding in stock evaluation.

39:57

Using Intel as an example, the speaker discusses interpreting chart patterns and volume price analysis (VPA). They emphasize the benefit of random stock presentation and note Intel’s high trading volume, highlighting how such data helps identify suitable stocks.

40:27

The speaker outlines key chart characteristics to observe, such as trend direction, congestion phases, and chart cleanliness. They stress the importance of quickly assessing these traits alongside volume data to make informed stock decisions.

41:00

Intel stock chart and trading pattern analysis

41:00

The speaker analyzes Intel’s stock pattern, noting a significant gap down from 64 to 60 in early May, followed by a doji candle indicating indecision. Despite some buying volume, the stock continued to decline nearly $10, resembling a classic waterfall decline. There was an attempt to rise with some upward movement and volume, but the stock eventually moved sideways and then fell again, illustrating typical price action and volume trends.

42:06

The discussion centers on how traders must interpret chart patterns based on their trading style. The speaker encourages viewers to decide if they prefer trading reversals, V-shaped recoveries, or breakouts from congestion phases with strong volume. Understanding personal preferences in trading volatile versus stable stocks helps in making informed decisions and recognizing which patterns suit one’s approach.

43:18

The focus shifts to another stock, ZS, which shows a gap up but lacks strong volume, raising questions about its sustainability. The speaker suggests that traders, especially those favoring reversals, might watch this stock for signs of continuation or reversal. A contrasting example is given with Cloudera, which experienced a large price jump on low volume, implying higher volatility and unpredictability due to the thin trading.

44:26

Volume is highlighted as a critical factor influencing stock volatility. Low volume often leads to more erratic price movements, regardless of the stock’s beta. The speaker notes that screening for volume and beta helps anticipate volatility levels. After reviewing many stocks, the speaker emphasizes the importance of volume in selecting stocks that match a trader’s risk tolerance and style.

45:01

Fallen angel stocks and accumulation patterns

45:01

The speaker introduces the concept of ‘fallen angels,’ using the biotech company BTX as an example. These stocks experience long periods of accumulation with low volume and little price movement, often following dramatic declines or being relatively new. Eventually, a catalyst such as news can trigger a sharp price rise, sometimes resulting in a pump and dump pattern. Biotech stocks are highlighted as particularly volatile, with rapid and large price swings.

46:15

BTX’s price surged from around $10 to nearly $90 on high volume before collapsing sharply, illustrating a typical fallen angel pattern. The low volume during the pullback and the sudden spike with a large tail on the candle suggest suspicious activity, possibly a pump and dump. Despite the dramatic fall, the stock stabilized around $15, showing a deflation of the ‘balloon’ effect. The speaker advises caution but notes some interesting metrics to consider.

48:25

The speaker explores BTX further using MarketBeat and Finviz, praising MarketBeat’s free version for its detailed insights. Key data includes news about a potential acquisition, average volume around 7.8 million, and an ATR indicating volatility. The company background is reviewed, noting the stock’s narrow daily range but significant volume. Additional factors like option activity, short positions, and institutional ownership are considered to assess interest and potential accumulation phases following the pump and dump.

50:50

BTX is noted as a worthy biotech company, particularly in cancer treatment, making it important to watch despite the risky chart pattern. The speaker then shifts focus to Brooklyn, which is set to join the Russell 3000 index, a move that typically attracts passive investment and can positively impact stock price, as seen historically with Tesla’s inclusion in the S&P 500. Volume analysis is emphasized for understanding accumulation phases and price stability, with the speaker beginning to discuss another stock called Skills, noted for its volume patterns despite limited price movement.

53:20

Skills stock and institutional ownership insights

53:20

The speaker analyzes a stock associated with a new esports platform, noting a disconnect between its volume and price action. Despite a class action lawsuit linked to the stock, the speaker advises not to be deterred by it. The stock’s dynamics are complex and worth deeper investigation.

54:25

The speaker highlights Kathy Wood of ARK Invest, a well-respected investor known for backing growth stocks like Tesla and Bitcoin, who has taken a significant stake in this esports stock. They emphasize the significant volume and price action disconnect and mention using StockBeat to uncover details about the company, analyst ratings, and institutional ownership.

55:34

The speaker explores the influence of social media and activist traders on market behavior, noting that Wall Street can no longer ignore these groups. They discuss how platforms like StockTwits reflect strong opinions that are actually impacting stock movements and stress the importance of understanding charts, volume, and timing for selling to take profits.

56:46

The discussion turns to options trading, explaining that the volume of calls and puts can indicate market expectations. The speaker plans to follow up on the esports stock and other interesting stocks in future sessions to build a narrative and provide ongoing analysis.

58:00

The speaker intends to share a list of currently hot stocks influenced by a large group of traders who can move markets. They caution listeners that this is not a recommendation to buy but an observation of where significant market focus currently lies.

58:35

Meme stocks and fuel cell fallen angel example

58:35

The discussion begins with an analysis of FuelCell, described as a ‘fallen angel’ stock. Despite its current low price of $9 and massive average trading volume, the stock’s previous highs near $240 create a misleading perception of value. The speaker warns investors not to assume the stock is a bargain just because it fell dramatically, emphasizing the potential risk of it going to zero despite heavy short interest and the possibility of a short squeeze.

01:00:25

Attention shifts to institutional buying in FuelCell, with $185 million invested and strong price accumulation indicated by narrow spreads and high volume. The speaker explains their strategy of identifying accumulation phases before a stock breaks higher, driven by increasing volume. They caution against buying late during price surges driven by media hype and FOMO, which often traps investors. Instead, they recommend focusing on earlier stages when the stock is still low, noting similar patterns in other stocks and hinting at another example, ADM.

01:02:14

ADM stock VPA signals and market behavior

01:02:14

The speaker analyzes a stock trend using volume price analysis (VPA), highlighting a shooting star pattern with high volume that signals potential weakness. Although the stock pulled back with a gap down, it did not fully reverse and instead showed sideways movement followed by another attempt to rise. The candles during this phase narrow with reasonable volume, culminating in a very small candle indicating the upward momentum is fading and the price then declines significantly.

01:03:23

A detailed VPA pattern is discussed where a strong downward move (waterfall) is accompanied by rising volume and wide candle spreads, followed by a buying anomaly characterized by high volume but a narrow candle. This suggests that the selling pressure is easing and the price slightly reverses. The speaker points out the importance of checking short interest and institutional ownership data to verify if the buying activity is genuine, especially after a congestion or distribution phase and another failed attempt to move higher.

01:04:28

The discussion continues with emphasis on institutional buying as a positive sign supporting the stock’s movement. The final example given is the Mimi stock, Clover, described as a pumped stock with heavy volume spikes followed by a sharp decline. This illustrates a typical pattern where a stock is aggressively pushed up but then experiences a rapid sell-off, highlighting the risks associated with such moves.

01:05:00

Clover meme stock analysis and volume action

01:05:00

The speaker discusses wide candles observed in the stock charts from an intraday trading perspective, noting that despite volume falling off, there are still trading opportunities. They comment on the unusually high volume in a particular stock, describing it as ‘insane’ and suggesting it would look interesting even without knowing the stock’s background.

01:05:31

The discussion shifts to another stock described as a ‘fallen angel,’ which has shown a roller coaster pattern with multiple rally attempts followed by declines. Since early 2021, the stock rose and then fell back until March, but only since early June has there been renewed trader interest, possibly due to chart analysis or short interest.

01:06:07

The speaker speculates on reasons for recent trader activity, such as chart patterns or short interest, before passing over to a colleague named David. They mention plans to explore and follow the stock charts over the next week using different time frames to identify potential trading opportunities.

01:06:34

Continuing the introduction to the focus stock, the speaker emphasizes reviewing daily and slower time frame charts to spot trading possibilities on faster time frames. They indicate this is just an initial examination and will add more updates as they monitor the stock moving forward.

01:07:19

The speaker provides the website address ‘memestocks.org’ for viewers to check out meme stocks. They then briefly mention a positive move on the YM index, noting it is breaking out into low volume. The segment ends with an apology for going over the allotted time.

01:08:06

Renko charts and non-time-based trading methods

01:08:06

The speaker explains using multiple Renko charts to trade effectively, highlighting the smooth price action and resistance breakthrough. They demonstrate how the Renko optimizer tool on NinjaTrader calculates the optimal brick size for different time frames—15 seconds, 30 seconds, and one minute—making trading decisions easier by automating this process.

01:09:14

The Renko bricks represent a fixed dollar value, which aids in trading clarity. The speaker emphasizes the power of non-time-based Renko charts combined with the Renko optimizer that automatically adjusts brick size for any instrument or market, including commodities like gold and oil. They also mention applying Volume Price Analysis (VPA) on time-based equivalent charts for complementary insights.

01:10:12

The discussion shifts to market context with falling yen and dollar values, and the VIX index dropping below 17, indicating favorable trading conditions. The speaker also highlights the strength of non-time-based charts such as tick charts and Renko charts in capturing raw momentum independent of time, which traditional time-based charts do not reveal.

01:11:13

The segment concludes by showing where to find various trading indicators on quantumtrading.com for platforms like MT4/5, NinjaTrader 7/8, TradingView, and TradeStation. The speaker notes two versions of TradeStation and mentions integration with Interactive Brokers accounts, facilitating seamless trading setups.

01:11:41

Quantum Trading indicators, platforms, and education

01:11:41

The speaker discusses integration between TradeStation and IB accounts, highlighting the flexibility to trade across all markets offered. They emphasize Deep Discount Brokerage as an excellent platform for trading a wide range of instruments. The ongoing development of indicators for TradingView is mentioned, including a cryptocurrency strength indicator and a volume-weighted average price (VWAP) indicator. The speaker notes plans to port these indicators to other platforms over time. Customers who purchase one indicator receive credits when upgrading to packages or educational programs, and full package buyers get all future indicators for free. The segment concludes by referencing the forex education program and the addition of funded forex trading options.

01:13:09

Forex funded trading program and session wrap-up

01:13:09

The speaker explains a trading program where participants can start with a funded evaluation account at various amounts like 5,000, 10,000, or 15,000. Upon reaching profit targets, the account is multiplied by 4, significantly increasing trading capital. As traders progress up the funding ladder, they earn a percentage kickback starting at 35% during the evaluation stage, rising to 50% at higher levels, and eventually 60% when trading up to a million dollars. This kickback is paid monthly, offering an attractive income opportunity. Additionally, resources such as analysis, books, and links are provided to support traders.

01:14:12

The session concludes with thanks to the participants and an apology for running over time. The speaker reminds viewers they will receive information about future webinars via mailing lists. They express hope that attendees found the session informative and encourage everyone to stay safe and enjoy their trading activities. Finally, the speaker mentions taking a break for a dog walk before returning to continue the trading day, signalling the end of the session.

By Anna Coulling – creator of volume price analysis