Bulls on Wall Street: Stop Guessing. Start Trading.

VWAP - Volume Weighted Average Price - is a powerful trading tool. While the indicator has a multitude of uses, I have found it's particularly helpful in conjunction with intraday earnings breakouts. On Monday, I used the VWAP for a trade in $ALDR.

How I Use the VWAP

  • Every morning, I scan for stocks that are breaking out on a strong press release or earnings announcement
  • For me to be interested, the stock must breakout above a key level of resistance
  • $ALDR had been forming a downtrend for awhile, then on Monday it gapped over the trend line and its 20 and 50 DMAs, which constitute three levels of significant resistance
  • I began stalking it for an intraday entry, as buying in the first big move provides poor reward to risk
  • It formed a level of resistance, and I knew a breakout over that could be powerful
  • But, the smart money doesn't buy at the high, but instead buys a dip in anticipation of the breakout
  • I bought $ALDR when it pulled back to the VWAP - the $25.20ish level - in anticipation of breakout
  • The breakout failed, but because I had a good entry, I still made money, selling up to almost $28

There is nothing magical about the VWAP. Just because a stock touches it, doesn't mean it's a valid buy or sell signal. But, I have found that when a stock makes a strong morning run and then pulls back, the VWAP is often a spot where it founds strong support. Ideally, you want to see high relative volume on the run up, then lower volume on the pullback; $ALDR exhibited these traits. Take a look at the following video of my $ALDR trade, and as always, email me if you have questions!

About Kunal Desai

Kunal Desai is the Founder and Lead Instructor at Bulls on Wall Street. Since 2008, Kunal has helped thousands of traders reach their trading goals through his unique live trading courses. Kunal is a day trader by day and industry leading instructor by night.

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