Volatile price action isn’t random.
It might look random to a trader with less experience… but every tick up and down happens for a reason.
And every chart setup gives us subtle clues about the next move.
Some clues are stronger than others…
That’s how we get our trade patterns.
We’re always looking for the strongest setups in the market because:
- They have the best chance of success.
- The money in our account is much safer.
It’s not enough to make money in the market. We also have to stop ourselves from losing money.
There’s a pattern we saw yesterday on Uber Technologies, Inc. (NYSE: UBER). I’m looking for it again today.
It’s my afternoon trade strategy…
The #1 Indicator for This Pattern
If I could only have one indicator on my chart, it would be VWAP.
It stands for volume-weighted average price. And the name tells us exactly what it does: it tracks the average price of a stock over the course of the day, weighted by how much volume is traded at each price.
That last part is what makes it unique.
A regular moving average treats every minute the same. A quiet minute at noon counts just as much as the opening bell. But VWAP doesn’t work that way. It leans toward the prices where real money actually changed hands.
So when you look at VWAP, you’re looking at the average price the market paid.
Every institution, every fund manager, every desk with a big order to fill is getting graded against that number. They want to buy below it and sell above it. That’s their benchmark.
Support and resistance levels drawn from old highs and lows are fine, but the big players pay the most attention to VWAP.
When a strong stock pulls back into VWAP, you’re standing exactly where institutional buyers have an incentive to step in.
Yesterday, I watched a stock that fit this pattern perfectly…
The Setup on UBER
On the multi-month chart, UBER was pushing against resistance at $80 per share.
I theorized the price could stretch higher, above the breakout level, if only there was evidence of support on the chart…
That’s where VWAP came into play.
The price consolidated all day on Tuesday around the $80 level, just above VWAP.
If consolidation holds into the afternoon (around 2 P.M. ET), that’s my cue to find an entry close to VWAP.
I’m hoping for a bounce to sell for gains, but if the stock crosses below VWAP I get out, no problem.
Small losses are part of this process, that’s true for every trading strategy. And VWAP gives us a risk level to help control our losses until we hit the next winner.
Look at the price action intraday on UBER:
With a short-dated options contract, that bounce will return exponential gains compared to the actual move on the chart.
A less than 1% move can turn into a +50% gain with the right options contract.
Look for strong stocks that base above VWAP in the afternoon.
That’s just one of the patterns I use to trade…
To leverage my entire trading strategy, join me on September 15 and 16 for a LIVE training session.
Every pattern in your arsenal gives you more opportunities to gain. It’s a no-brainer. Join me on September 15 and begin the rest of your trading career.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
