Using the volume price analysis methodology to day trade stocks like GME and others

Using the volume price analysis methodology to day trade stocks like GME and others

00:00

Introduction to day trading stocks webinar

00:00

The webinar introduction welcomes attendees to the final session focused on day trading stocks. It acknowledges returning participants from a previous futures trading webinar and emphasizes the risks involved in trading, advising viewers not to use money they cannot afford to lose. The host notes the presence of new participants joining the session.

00:30

Volume Price Analysis methodology overview

00:30

The speaker introduces the volume price analysis (VPA) methodology, which they and their husband David have used for nearly 20 years to analyze the relationship between price action and volume to predict future price movements. They mention a book available on Amazon explaining these concepts in detail and a companion book with worked examples covering stocks across multiple time frames, indices, and commodities. The speaker emphasizes that the specific ticker symbol is less important than the analysis itself, though fundamental factors like central bank actions or market sentiment should be considered depending on the asset type.

01:38

The speaker explains that all critical information is contained within the chart itself, which forms the foundation of VPA. They combine price and volume analysis with candlestick patterns and both price-based and volume-based support and resistance levels, which represent key price areas where reversals, corrections, or breakouts may occur. Additionally, traders can incorporate standard technical indicators like Bollinger Bands, Stochastics, fractals, and moving averages along with proprietary tools developed by the speaker. The approach is demonstrated through live chart examples.

03:16

The methodology applies across multiple time frames rather than focusing on a single interval, including non-time-based charts such as tick and Renko charts, providing broader market context. The speaker notes the recent start of a new webinar series focused on stock trading, where they began outlining these concepts in detail.

03:51

Stock selection and heavily shorted stocks

03:51

The speaker discusses the challenges of selecting stocks as a day trader, noting the vast number of stocks compared to the limited forex pairs. They highlight the importance of having a selection process or filters for stocks. A specific focus is on heavily shorted stocks, exemplified by the GameStop situation, where hedge funds have taken large short positions betting the stock price will fall. Opposing them are activist traders, particularly on Reddit’s WallStreetBets, who have been challenging these positions. The speaker also mentions that the options market can aid in stock selection and explains that heavily shorted stocks often present unique trading opportunities.

06:18

Short squeeze concept and high short interest stocks

06:18

The speaker explains the concept of a short squeeze, where buying pressure forces short sellers to cover their positions, further driving up stock prices. They introduce a website, highshortinterest.com, which lists the most heavily shorted stocks. Currently, there are 67 stocks with high short interest, fewer than usual due to the strong market uptrend since the last correction, which has caused many shorts to exit.

07:34

The market is described as heavily skewed with most participants being long, creating fragility due to this imbalance. The speaker references their blog, anacooling.com, where a detailed post explains this fragility, including a volume price analysis (VPA) lesson on the YM daily chart that served as an early warning for the current market conditions.

08:11

Market conditions and upcoming FOMC meeting

08:11

The speaker discusses the upcoming FOMC meeting and recent market volatility, noting that although the Dow futures are down 350 points, they are recovering slightly. They review the Nasdaq’s daily chart, highlighting a heavy down day followed by some buying activity. The speaker introduces a stock selection tool useful for identifying potential short squeezes or ongoing downtrends. They also mention using the Train Station platform for sessions and address screen resolution issues experienced during a previous session, explaining how to improve visibility.

09:54

Analyzing specific stocks: Kellogg’s, GME, others

09:54

The speaker discusses analyzing three stocks on an hourly chart: Kellogg’s, Bed Bath & Beyond, and Ligand Pharmaceuticals, along with GameStop. GameStop’s stock price surged partly due to Elon Musk’s comments and a major hedge fund, Melvin Capital, closing out its substantial short positions after significant losses.

11:08

The speaker explains the context of short selling, noting that Tesla was heavily shorted a year ago. Hedge funds short stocks for various fundamental or technical reasons, building large positions. In GameStop’s case, activist traders from Reddit have driven volatility and a potential short squeeze, causing sharp price increases accompanied by high volume and volatility indicators.

12:49

Volatility indicator and trading strategy

12:49

The speaker explains that volatility leads to momentum and sharp price movements. They highlight the importance of recognizing volatility using indicators such as standard deviation (used in Bollinger Bands) or average true range (ATR), which their volatility indicator is based on. When volatility triggers a ‘volatility candle’ outside the ATR on an hourly chart, prices often reverse back into the candle’s spread. This pattern is common in volatile stocks like GME, and traders can use it to anticipate price reactions in real time.

14:46

The speaker notes that volatility signals are especially useful near the end of an hourly period when aggressive buying or short squeezes occur, often leading to a reversal into the candle’s range. They recommend patience and using the hourly chart to wait for these triggers. The speaker also demonstrates how they use a radar screen with multiple indicators and timeframes to identify such volatility triggers across various stocks, including Kellogg’s, Bed Bath & Beyond, and pharmaceutical trades.

16:32

Further discussion focuses on making volatility work for traders by understanding price action responses to volatility injections and momentum surges. The speaker highlights trend indicators on faster timeframes, support and resistance levels, and how the radar screen helps identify potential reversals when volatility exceeds the average true range. This setup enables traders to anticipate and capitalize on price movements following volatility triggers.

17:40

The speaker reviews the three-minute chart showing a price move higher with moderate volume, rebounding from a key support level (VPOC) near an R6 resistance level. They explain this price action aligns with expectations from the hourly volatility trigger. The ongoing battle around the day’s high exemplifies how volatility can dictate price battles in the market. The speaker prepares to hand over to another presenter for further analysis, noting that GME was chosen due to its high short interest and media attention.

19:45

Market update and index analysis

19:45

The speaker discusses market indices reaching pause points after a recovery phase, highlighting volatility patterns observed on shorter time frames like the five-minute YM chart. They explain the concept of the volume point of control, noting its dynamic nature as it shifts with trading volumes. The market has reversed back up to this volume point of control across multiple indices, including YM, NQ, and ES, indicating consolidation as traders await significant announcements expected in the next few hours. Additionally, the speaker points out risk-off sentiment reflected in safe haven currencies like the dollar, Swiss franc, and yen strengthening, while commodity currencies are selling off sharply in response to the market environment.

22:18

General Electric stock analysis

22:18

The speaker introduces the stocks page, focusing on GameStop (GME) and General Electric (GE). They discuss GE’s historical price decline from the mid-30s to around six dollars, noting the company’s challenges and potential for long-term recovery. The weekly chart is used to illustrate this long-term trend.

23:32

The discussion shifts to intraday trading using volume price analysis (VPA) indicators, which apply consistently regardless of the stock or trading style. The speaker highlights the importance of pre-market data for intraday traders, emphasizing that low pre-market volume is less significant than the price levels established, which help set stop losses or identify key breakout points once the cash market opens.

24:36

Key resistance levels in the pre-market are identified using the accumulation distribution indicator, which shows strong areas of price resistance tested multiple times. These levels are crucial for traders to consider potential stop losses or shorting opportunities. The speaker explains that clusters of tested price levels indicate stronger resistance zones.

25:42

The accumulation distribution indicator visually represents market strength and weakness by thickening lines at frequently tested levels, similar to muscles growing stronger with repeated use. Clusters of minor tested levels combine to form stronger resistance zones. The current pre-market reflects a significant sell-off consistent with broader market trends, although individual stocks like GE may not always align perfectly with major indices.

26:41

The recent sell-off in GE is analyzed, noting two volatility triggers followed by some buying indicated by a hammer candlestick with decent volume. However, the subsequent rally is weak, with narrowing spreads and falling volume, encountering minor resistance levels. Overall, the 10-minute trend remains bearish, indicating continued downward pressure on the stock.

27:39

A detailed look at the 5-minute chart shows a volatile pre-market rally followed by a quick decline and two volatility triggers. Buying attempts occur but are met with weakness, leading to a sideways movement with volume control indicating a lack of strong momentum. The analysis suggests GE’s price is likely to remain range-bound in the short term.

28:36

Detailed GME stock chart analysis

28:36

The segment analyzes the highly volatile daily and 15-minute charts of GME stock, highlighting its recent dramatic price surge and associated market volatility. It emphasizes the importance of recognizing volatility triggers when trading, advising traders to take profits and exit positions rather than enduring congestion or reversals. The advice is to wait for the market to stabilize before re-entering.

30:08

The discussion focuses on a strong resistance level around $340 that GME has tested twice. If the stock breaks and closes above this resistance, it would likely move higher because the previous resistance would become new support. Volume analysis shows diminishing volume at higher price levels, suggesting it may be easier for the stock to break through this resistance zone.

31:26

The segment explains the relationship between volume, price, and time, noting that longer price consolidation in an area accumulates volume there. It reviews multiple time frames and volume clusters, emphasizing strong price support levels below current prices and the potential for the market to either pause near $350 or break through to higher levels like $390. The trend monitor indicates a bullish outlook across various time horizons.

33:49

The analysis continues with observations of bullish signals across 1 to 30-minute charts. Price action is moving steadily upward through key levels like $348 to $350 and beyond, supported by strong volume and widespread candles. Some indecision is noted in short-term candles, but overall momentum remains positive, suggesting sustained buying interest.

34:57

Price movements show a lively and active market with buyers stepping in during minor pullbacks, keeping the uptrend intact. Rising volume accompanies these moves, though some candles exhibit less volume than expected for their size, indicating possible selling pressure. Despite this, the pattern suggests continued buyer dominance and potential for further upward movement, though caution is advised for short-term reactions.

36:54

The market shows repeated buyer support during dips, with volume increasing as buyers defend lower price levels. This behavior indicates a strong desire to push prices higher, although the segment notes the possibility of temporary wicks and reactions. Overall, buyers continue to outweigh sellers, maintaining upward price momentum.

37:57

Volume continues to build as buyers step in repeatedly to support the price, suggesting sustained demand. Some traders have taken profits and exited at various points, but more buyers remain willing to purchase at higher prices. The price action on shorter time frames remains positive, reflecting ongoing bullish sentiment.

38:54

The segment concludes by noting that GME is approaching a potential short-term top near $380, warranting close observation. It then briefly compares GME’s dynamic price action with GE’s relatively stagnant and sideways movement, highlighting contrasting trading environments. The commentary implies that different stocks require different trading approaches depending on their volatility and market behavior.

39:34

Choosing stocks based on volatility and psychology

39:34

The segment discusses the importance of understanding implied and historic volatility when trading stocks and emphasizes choosing stocks that fit one’s comfort level and trading style. It highlights the necessity of aligning one’s trading approach with personal psychology, available time, strengths, and weaknesses. The speaker stresses the value of self-awareness in trading, recommending psychological education as a foundation. The segment concludes with a brief market update noting a slight decline in the dollar, movements in commodity currencies, and selling pressure on the yen.

41:10

Currency market overview and trading considerations

41:10

The speaker analyzes the current currency market, noting that the dollar is very overbought on the hourly chart while the yen and Swiss franc are showing signs of selling off and reversing. Commodity currencies like the Australian and New Zealand dollars are beginning to curl, presenting potential buying opportunities if these currencies continue to decline and follow the yen and Swiss franc’s movement. They emphasize the need to decide whether to hold positions through major events like the FOMC meeting, suggesting caution around significant news releases.

42:30

The speaker advises against trading through major news events like the FOMC due to the risks involved, recommending waiting until after the event to enter positions. They conclude the session by briefly mentioning where to find trading indicators on various platforms including QuantumTrading.com, NinjaTrader, TradingView, and TradeStation.

42:36

Accessing trading indicators and educational resources

42:36

The speaker discusses the availability of various trading indicators on different platforms. They mention that the TradingView indicators, including the currency matrix, currency heat map, V-POC, and support resistance, will be available as a full package and free of charge for those who already have the TradingView indicators. They highlight resources such as annacooling.com for books and links to the indicators, as well as the funded forex program available at quantumtradingeducation.com. The session concludes with these final remarks.

43:35

Closing remarks and future webinar plans

43:35

The speaker thanks the audience for attending the sessions, expressing hope that they found them enjoyable and informative. They encourage attendees to enjoy the rest of the trading day and week, and offer to answer any questions via email. They also mention that participants on the list will receive further details by email, likely on Monday.

44:12

The speaker notes the possibility of running these sessions weekly, promising to send updates regularly. They conclude by thanking the audience, wishing them well, and signing off until the next meeting.

 

By Anna Coulling – creator of volume price analysis