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The ABC’s of VSA: Signs of Weakness
By Lauren Snedeker
Objectives for Today
• Learn to read a chart and detect weakness in the market
• Learn how Supply and Demand play a role in detecting weakness in the market
• Come away with one clear VSA Principle in your mind
Supply/Demand
Demand for Uggs Boots
Price For Uggs Boots
$200
# of Units
Supply in a Weak Market
• In a Rising Market, look for a huge amount of Volume to appear
• Volume = Selling orders by the Smart Money into a rising Market
• The Signal is often Climactic Action or Supply Coming In or Buying Climax
The Distribution Phase
What it looks like
• Volume = Ultra High
• Spread= Massive
• Close = Mid to High
• Trend = Up
The UpThrust
• Up Bar
• Bottom Close
• Next Bar down to confirm signal
Smart Money Thinking
• As the price rises, Smart Money sells into the market: to catch the Herd going long
• As each order comes in one after another, it creates Ultra High Volume
• When the volume disappears, they have dumped their supply and are not interested in higher prices = No Demand
No Demand
What it IS: the withdrawal of interest by the SM in higher prices
• Up Bar
• Next Bar Down to confirm
• Narrow Spread
• Low Volume: the lower the better to show lack of selling by the SM
No Demand
1. It is a confirming signal of weakness
2. You need weakness in the background:
Buying Climax, End of a Rising Mkt, UpThrust
3. You should be in a downtrend before shorting – downtrend implies weakness
No Demand: Serious Weakness
Why that worked
Followed an UpThrust
In a downtrend
Serious weakness in the background: Potential Buying Climax three times
No Volume
Confirmation at the 30 minute
Trap Upmove (Bar B)
Based on two bars: 1st closes up off the highs
2nd widespread down bar closing near the lows
2nd bar’s high is higher than the 1st bar, tricking people into going long
If low volume (no selling) & weakness in bkgrd it is a strong sign of weakness – can lead to a strong rally – Bar A = Weakness in Background
Failed No Demand
Why it failed
• The volume was fairly high
• The next bar closed up on higher volume
• The Supply Coming In bar right before it had a lot of volume = a lot of selling to do before it can go down again
• Not until the UpThrust and then the down bar on lower volume do you see the short
Conclusion
• Weakness appears on an UP Bar
• Short when you are in a downtrend
• Use the UpThrust as the middle signal
• No Demand is a confirming signal of serious weakness behind you
• Be Patient!!!!!!!
Special Offer
• Own Real Time Software for $999.95
• Get Gavin’s ebook Trading in the Shadow
• Get the Chart Reading Master Class
• Get the VSA Trading Course
• Email me after the webinar: [email protected]
