2010issue C0648-53
Constructing daily volume-profile breakout levels
A daily volume-profile level is built from that day's open, high, low, and close. Volume profile can locate support and resistance that may not be obvious on a candlestick chart, and those daily levels are useful when a stock is breaking out of a 52-week high or low.
- A daily volume-profile level is constructed from that day's open, high, low, and close, not from an hourly or 15-minute interval inside the day.
- Volume profile can locate support and resistance that may not be obvious on a typical candlestick chart, including when a stock is breaking out of a 52-week high or low.
- The same construction is especially useful for daytraders assembling executable levels.
- Support, resistance, and trendlines are basic structure tools. Indicator turning points prompt that structure rather than acting as a direct buy or sell.
Build the daily volume-profile map first
A daily volume-profile level is constructed from that day's open, high, low, and close rather than from an hourly or 15-minute interval inside the day.
Volume profile is a volume-at-price construction that locates where trading concentrated so those prices can be used as executable support, resistance, and breakout levels.
The same volume-profile construction is especially useful for daytraders assembling executable levels.
Test the map against support and resistance
Volume profile is presented as a way to locate key support and resistance that may not be obvious on a typical candlestick chart.
Support and resistance are horizontal or dynamic price levels used as the structure against which a volume-profile map is tested.
Support, resistance, and trendlines are treated as basic structure tools, with indicator turning points used as a prompt to draw that structure rather than as a direct buy or sell.
Read a 52-week breakout against constructed levels
Those daily volume-profile levels are described as useful when a stock is breaking out of a 52-week high or low.
A breakout is a move through a prior range extreme, such as a 52-week high or low, that is read against already constructed volume-profile levels.
Draw structure from moving averages
A 20-day simple moving average is used to help draw short-term trendlines, while 50- and 200-day simple moving averages are used as dynamic support and resistance.
A long setup is treated as more favorable only after price breaks a downtrend line, because nearby resistance can leave an unattractive risk-to-reward ratio.
All readings on this track · 8 readings
- 2005Decaying volume bands as leftover auction inventory
- 2008Constructing equal-volume and open-interest auction zones
- 2010Constructing daily volume-profile breakout levels
- 2010Building volume profile maps for support and resistance
- 2015SPY volume profile as a support and breakout map
- 2016A three-layer sector map around a policy-meeting week
- 2017A three-part liquidity screen before a futures idea is executable
- 2020A two-gate liquidity filter before futures order selection