VWAP Basics – Chart Setups
MY FAVORITE CHART SETUPS
In Warlock’s World we care about VOLUME and PRICE.
However, there are some other chart setups and patterns that are crucial to being a successful VWAPian.
First is the “Fakeout, Shakeout, Breakout” – or the Fo’ Sho’ Bro.
To see the Fo Sho Bro in action, click here or on the image below for a video breakdown.
When a stock tests and is subsequently rejected at the 1-minute VWAP (blue line), you’ll sometimes see a quick and dirty sell-off.
Take this recent chart from Snapchat (SNAP), for example.
This is when the dip keeps dipping.
A handy pattern to be aware of when the market has been facing aggressive sell-offs like it has been recently.
Another Warlock’s World favorite is the Checkmark of the Lord AKA the Dip & Rip.
On this pattern, you’re looking for a stock that falls below the 1-minute VWAP…only to bounce off support at the multiday VWAP. That’s your first sign that the selling might be over already.
Take a look at a recent example from Digital Turbine (APPS).
And perhaps the most popular chart setup of ALL TIME in Warlock’s World…
The Kardashian Bottom.
Also called the “buttcrack bottom”, this pattern looks like the letter W.
This is when a stock breaks down, tries to rally, fails, falls back to relatively the same level and then tries to break out again.
If the stock is able to get over the middle point of the W and rally back where it broke down from, there’s a good chance it can go higher.
Here’s an example of a Kardashian Bottom.
What I want you to see is how the price action and candlesticks form the left cheek when the stock breaks down…
How it tries to rally and fails…
How it forms the right cheek after eventually breaking back over VWAP to the upside…
And how it moves higher after rising above both the middle of the “crack” and the price it broke down from.
Kardashian Bottoms appear frequently on charts. The chart above is a good example of the bigger the butt, the bigger the breakout.
These are probably my favorite setups to trade, and you’d be surprised at how frequently they appear on stock charts.
And remember – these patterns can be inverted and work the exact same way.
Of course, the best way to learn to spot and trade these kinds of chart setups is to become a fully fledged member of my Warlock’s World.
Kenny “The Warlock” Glick