SB Trade Desk: Volume Reversal Examples

We’re always looking to incorporate new trading tools in our arsenal.  Over the summer, I conducted extensive research on volume.  Specifically, I wanted to see if there were patterns in volume at market turns.  The scans are run on daily, 8 hour, 4 hour, and hourly time frames.  Since the FX market lacks a centralized exchange (over the counter), currency signals are generated with futures data.  Several examples over the last month are reproduced in the below charts.  The AUDUSD, NZDUSD, and CADUSD (futures so the chart is opposite of spot) examples helped us nail near term turns.  The Nasdaq example did not work out but that chart failed to follow through on the downside anyway (no trade signal).  After a rough first 9 months of 2019, we’ve booked over 800 pips since October 1st.  The trading turnaround is due in part to the volume reversal tool.  Needless to say, we’re excited about trading prospects moving forward!

-Jamie Saettele

-@JamieSaettele

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AUSTRALIAN DOLLAR FUTURES 4 HOUR (from 11/14 Swing Update)

AUDUSD low today is the exact 61.8% retrace of the rally from 10/2.  Strength above .6809 is needed for me to consider the long side again though.  A 4 hour volume reversal triggered today (see below).  The same reversal occurred at the Oct low, Jan high, and Dec 2018 high.  There were false signals in between but the combination of a volume reversal at Fibonacci support warrants attention.

NASDAQ FUTURES (NQ) 8 HOUR (from 11/7 Swing Update)

NQ carved an 8 hour volume reversal today.  There have been some good ones, especially in 2018.  The combination of the long term level in QQQ and the volume reversal in NQ is a strong short setup.  Price also reached the line off of the 2019 highs (see below).  A drop under 8140 (short term trendline) would suggest that a top of sorts is in place.

NEW ZEALAND DOLLAR FUTURES 8 HOUR (from 11/3 Swing Update)

The NZDUSD rally from the October low is in 5 waves and an 8 hour volume reversal triggered on Friday (see below).  I’m willing to try the short side given the proper short term pattern development (a small 5 waves down and 3 waves up for example).  Bottom line, near term NZDUSD focus is lower until noted otherwise.

CANADIAN DOLLAR FUTURES 4 HOUR (from 10/29 Swing Update)

USDCAD reached the 75 line today (low at 1.3042!) and reversed, forming a J-Spike (magenta bars).  As long as today’s low is in place, I’m respecting near term upside potential.  Initial resistance is 1.3134 (see short term red parallel on chart below as well) followed by the median line near 1.3180.  I like that a 4 hour volume reversal also triggered today (see 2 charts down).