The Anchored VWAP Strategy That Helped Martin Luk Return 969%

Key Concepts

• Anchor VWAP (Volume Weighted Average Price): A type of VWAP calculated from a significant low point in a stock’s price movement, often used to identify potential support levels.
• 9 EMA (Exponential Moving Average): A 9-period Exponential Moving Average, a technical indicator used to smooth price data and identify trends.
• Brick Retest: A price action pattern where the price revisits a previously established support or resistance level (the “brick”) after a breakout.
• Base: A period of consolidation in a stock’s price, characterized by relatively stable trading range.
• Support Level: A price level where a stock tends to stop declining due to increased buying pressure.
• Previous Highs/Supports: Prior price points where the stock demonstrated either resistance (highs) or support.

Identifying High Probability Support Levels

The core concept discussed revolves around identifying areas where a stock is most likely to find support during a pullback, particularly within a larger base pattern. The speaker highlights a confluence of three distinct buying points that, when combined, create a high-probability support zone.

Specifically, the speaker details that if three different traders enter positions at different, yet strategically chosen, levels, the resulting concentration of buying pressure significantly increases the likelihood of support. These levels are:

1. Anchor VWAP: Buying at the Anchor VWAP – calculated from a significant low within the base – is the first key indicator. This VWAP acts as a magnet for price, as it represents a significant average price paid by buyers.
2. 9 EMA: A second trader buying at the 9 EMA provides additional support. The 9 EMA, being a shorter-term moving average, reacts quickly to price changes and can act as a dynamic support level.
3. Previous Highs/Support Levels: The third trader buys at previously identified highs (which now act as potential support on a pullback) or established support levels. This leverages prior price action and areas where buyers have historically stepped in.

The Importance of Confluence

The speaker emphasizes that the combination of these three buying points is crucial. It’s not about relying on any single indicator, but rather the confluence – the coming together – of these signals. The more buyers concentrated at a particular price level, the stronger the support is likely to be.

Application to Brick Retests & Bases

The speaker specifically notes the usefulness of this approach “especially on a like a brick retest within a base.” This means that after a stock breaks out of a consolidation range (the “base”) and then pulls back to retest that previous resistance (now potential support – the “brick”), identifying the confluence of the Anchor VWAP, 9 EMA, and previous support levels becomes particularly valuable.

The example provided describes a “huge base,” implying a significant period of consolidation and a potentially strong breakout. Within such a base, the Anchor VWAP is particularly relevant as it’s calculated from a significant low point within that base.

Supporting Argument & Practical Insight

The underlying argument is that price action is heavily influenced by order flow and the concentration of buyers and sellers. By identifying areas where multiple traders are likely to have entered positions, one can anticipate areas where buying pressure will be strongest and therefore, where the price is most likely to find support.

The speaker doesn’t provide specific data or statistics, but the statement implies a statistically higher probability of support when these conditions are met. The insight is actionable for traders looking to identify optimal entry points or anticipate potential reversals.

Conclusion

The primary takeaway is that identifying high-probability support levels isn’t about relying on a single indicator, but rather recognizing the confluence of multiple technical signals – specifically the Anchor VWAP, 9 EMA, and previous highs/support levels. This approach is particularly effective during brick retests within established base patterns, offering traders a more informed perspective on potential price movements and support zones.