Volume profile is another powerful method that I have been using to understand if the breakout is sustainable and if there is accumulation done by smart money. Volume profile essentially reflects how much volume is built up at a specific price level. This becomes especially important when there is a huge accumulation just before the breakout.
This is not the only basis for taking a trade but we combine it with Ichimoku Cloud and Neo wave patterns. Now look at the below volume profile chart which showed significant volume at a specific TPO (Time Price opportunity).
JSW Steel – Anticipated on 29th October 2019 using Volume profile
JSWSteel chart: Happened
JSW Steel showed significant move of more than 10% in a few days post the accumulation was complete in the zone. It might be confusing to look at the unorthodox chart plot above but trust me it is easy once the basic concepts are understood with clarity.
There are tendencies of prices to give false break but if there has been huge volume accumulation and a precise entry is seen on Ichimoku Cloud with a clear Elliott wave pattern you cannot stop from taking that trade. Despite of all these advanced methods markets might not do what we expect and so use of strict stoploss is a must.
JSW Steel behaved precisely and gave a significant move of more than 10%. Along with this it is also important to keep a tab on broader index Nifty and its Neo wave pattern as majority of the stocks will move in correlation to the index.
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