The ABC’s of VSA: Absorption Volume & Breakouts By Lauren Snedeker
Today’s Objectives Define and understand Absorption Volume Confirming the Breakout Bar Entering the Breakout Trade Recognize a False Breakout
What is Absorption Volume? • Let’s work backwards and review what we know! • Take out a pen and paper and number it 1-5 • Is the sentence True or False? If False, correct the answer. Ready??????
Quizeroo 1. Volume = the Supply in the market 2. Up Bars on Ultra Low Volume is the Climactic Action 3. The Smart Money sells in rising prices 4. A No Demand bar confirms rising prices 5. Support & Resistance should be ignored
Quiz Answers 1. Volume = the Supply in the market True
2. Up Bars on Ultra Low Volume is the Climactic Action False – Ultra High Volume
3. The Smart Money sells in rising prices True
Quiz Answers Contd… 4. A No Demand bar confirms rising prices False – No Supply 5. Support & Resistance should be ignored False – observed How did you do?????
Absorption Volume Uptrend Wide Spread Up Bar Closes on the high Ultra High Volume Breaks through an old top to the left
The Exception Principle
What Absorption Volume means • The Wide Spread Bar = Effort by the SM to push to price up • The High Close = Interest or Demand for higher prices by the SM (vs an UpThrust) • The Ultra High Volume = Supply being absorbed or bought or accumulated by the SM • Must break through an old resistance area • A genuine breakout is tested within 2 bars
Example 1: SPX 5 Minute
Example 2: ES 5 Minute
B – Test of Supply within 2 bars C – No Supply/Test D – Test
Example 2 - 700 Bar History
Example 3: ES 15 Minute
Example 3: 700 Bar History
Example 3: Support & Resistance
Entry Points • A No Supply/Test in a Rising Market (uptrend) • Enter above the high of the No Supply • A Genuine Breakout is tested within 2 bars • A down bar on volume lower than the previous 2 bars (pink in TG) • Next bar closes up
False Breakout vs True Breakout
False Breakouts False Breakouts Fail on No Demand – they go up on low volume and come right down Upthrusts further confirm weakness 2 Bar Reversals or No Result after Effort – kill the momentum and stop the buying
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