Update on Swing VWAP $AAPL Trade

February 15, 2019

I decided to close my Swing VWAP trade in $AAPL. It’s been unable to close above the upper VWAP, so it looks weak here:

I’ll watch for a retrace and another setup.

Example Swing VWAP / RSI Divergence Trade: $AAPL

February 8, 2019

Here’s a trade I entered in Apple about 2 weeks ago where I used the Swing VWAP and the RSI MultiDivergence indicators.

Back in January, the market had gone through a good decline. I was watching the RSI divergence on AAPL. Around that time, a big divergence showed up. This was about the largest in the last two years, and is circled on the chart below. Because of that context, I wanted to look for a long entry. After the swing low on January 3, AAPL kept above the Swing VWAP. It pulled back close to the Swing VWAP, and then on January 15 it had a bullish reversal candle (white arrow). That means the bears are losing, since it couldn’t penetrate the lower VWAP. I entered at the end of the day (yellow line) with a stop at the prior day’s low Swing VWAP (red line), and a target at $185 based on prior resistance.

So far, the trade is going according to plan. My stop is at $160 now, and I just have to manage when I take profits–at the predetermined target or in a discretionary manner. I’m really liking the Swing VWAP for how it tracks what side is winning and what side is losing. As a trader, your money comes from the losers. Markets move because they have to, and that happens because people are blown out of their incorrect positions.

ProSwingVWAP Chart: $SPY

November 20, 2018

At Friday’s close, the $SPY closed below the short ProSwingVWAP level (see 1 in the chart below). Today, it gapped down big (2 in the chart below). This is the kind of thing I’m looking for, and I’m studying if there’s an edge there and coming up with a trading strategy for it.

ProSwingVWAP: Combining Swing Points with volume-weighted prices to define trends

November 19, 2018

Hello, it’s been a long time.  Life finds a way to get you off track.  I’m trying to get things here up and running again.

This is something I was working on a long time ago, and I just re-visited it this last week.  I think it’s interesting, so here it is: ProSwingVWAP.

2018-11-18-ProSwingVWAP

A VWAP is a volume-weighted average price.  I talked about VWAPs more here.  The idea for this indicator is to use Swing Points to define the period where we start tracking the volume-weighted value.  The chart above shows it in action.  I like using a VWAP as the price input, so you get a running volume-weighted total of each bar’s VWAP.  Kind of a VWAP squared.  You can use close, high, low, etc. as well.

Once a swing point (white dot) is charted, that swing point becomes the first value for that SwingVWAP.  From there, the price value you choose to average for the VWAP is volume-weighted on each bar and the running VWAP is adjusted.  This is done for swing highs (green dots) and swing lows (red dots) separately.  As long as a new swing high / low hasn’t been made, that long / short VWAP value will just continue to build.  A new swing high or low will reset the VWAP and start again.  I added optional paintbars to show green when a bar close is above the swing high VWAP, red if a bar closes below the swing low VWAP, and grey if it closes between them.  I also hide the VWAP value if bars close beyond them.

Because swing points need to have some future values to know if it really is a swing, there is a delay in this indicator.  The more forward bars you require to decide if a swing is in, the longer it will take for the data structure to be confirmed.  If you set the “FlagEarly” input to yes, then paintbars are yellow during this unknown stage.  The fastest reaction is if you use a value of 1 for Swing Forward, but you get more false positives this way too.  I usually use a value of 1 or 2.  The more bars back you look (Swing Back), you get fewer swings but they are bigger ones.  I mess with this value based on the timeframe and the particular name I’m working with, but I’ll usually use 8 or so.

I’m still in the research phase of this one, so I haven’t decided exactly what to do with it yet.  I like how it defines trends.  A bull trend is present when price is closing above the long SwingVWAP, and a bear trend when price is closing below the short SwingVWAP.  I also like the way it shows when a pullback is on, and when the trend resumes.  On the chart above of $SPY, the period from June to October is a prime example.  The market bottomed out at the end of July and then started an uptrend.  When a new swing high was in, the long SwingVWAP (green dots) told us when we were still in the pullback. Once price closed above the long value again, the trend was back on.  The short SwingVWAP kept trailing along below, reminding us that we were in a bull trend.  Then, as October started, we closed below the short SwingVWAP very dramatically, and the correction was on.  Now we seem to be right back in the middle of the two in a holding pattern.

For now it’s a just a context indicator rather than a trading signal, but it looks like it has some potential.  You can get ProSwingVWAP in the “Donors Only” folder in “Released Thinkscript Studies” at my Google site.  It will work on desktop or mobile, but paintbars only work on the desktop platform.

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Example Divergence Trade: Netflix (NASDAQ: NFLX)

October 23, 2017

Here’s a divergence trade I took last week in $NFLX, using the Multi-Divergence indicator in my trade plan. 

The setup: NFLX announced earnings on Oct 16.  Price made an all-time high.  I looked at the chart and saw a big divergence on the volume-weighted MACD.  The last big divergence in June led to a big drop. So I was looking to get in a bearish position. 

The candle on Oct 17 is the most recent bar on this chart. I saw that the bar had made the all time high and then fallen down below the prior day’s close, which I took as my bearish entry signal with NFLX at $200. 

The plan: $190 looked like a possible support, and a return to $204 would tell me my timing was wrong. I thought this move should happen in the next few days, so I bought the Nov 3 weekly options 197.5/195 put spread for $0.97.  I chose the 197.5 strike instead of the at-the-money 200 strike because it had higher gamma—it would have a larger change in delta with movement if I was right.  If the move didn’t come in the next day or so, I would get out and move on. 

I didn’t have to wait long:

The day ended red and had a good follow through day next. When the 190 support was nearly hit, I went to take profits. I sold for $1.57, which is a return of about 62%.  I love it when a plan comes together (extra Hannibal).

Note that the divergence indicator wasn’t the entry signal—it just provided context to give me an edge.  Divergences can often resolve with a continuation in the trend instead of a reversal. The context combined with the actual reversal behavior in the daily candles was what led me to take a trade. Always have a plan before you trade, and always follow your plan. My failures have come when I don’t do one or both of those things.