M/W patterns with vDelta divergence

Instrument : E-mini S&P500 futures

Date : 2020-04-27 10:20

Here we had a W reversal pattern followed immediately by a M reversal pattern. And such that’s a nice example to analyze, so what happened there?

1. The W pattern : up move

We can see that a low point has been set around 10h16 and then the price can’t go lower. Then a small push down around 10h20 with no followthrough sets a 2nd leg for a W pattern, and the price moved up.

We could have go long for scalp because we have several clues there:

  • Some liquidity has been added below the W
  • We can see that the price can’t go lower during a few minutes
  • The delta between buyers and sellers is increasing, meaning that buyers are taking control

2. The M pattern : down move

We can see that prise is rising up to the VWAP line (in white around 2852) but the vDelta is falling. We could have close the longs and even go short at the second M leg at 2852 because we have quite the same situation than previously but inverted:

  • liquidity added above the VWAP
  • price began to go lower before making a second leg
  • The delta between buyers and sellers is decreasing, meaning that sellers are taking control

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