Volume Spread Analysis (VSA) with Fibonacci on Large Candles

Volume Spread Analysis (VSA) with Fibonacci on Large Candles (Bullish & Bearish)

If you spot a large candle with high volume, whether bearish or bullish, you can use Fibonacci retracement on the candle itself to determine potential reversal or continuation zones. Here’s how to apply it in both scenarios:

1️⃣ Large Bearish Candle (Bearish Bar)

📉 (Red candle with high volume closing near the low)

How to Identify a Bearish Candle?

✅ The candle has a large body and closes near the low (strong selling signal).
✅ The volume is significantly higher than previous candles → Institutional Selling (Smart Money Selling).
✅ If volume is high but the candle doesn’t close at the low, it could indicate hidden buying (stopping volume).

How to Draw Fibonacci on a Bearish Candle?

1️⃣ Identify the high and low of the bearish candle:
• High = The top of the candle.
• Low = The bottom of the candle.
• This represents the range of the selling pressure in the market.

2️⃣ Draw Fibonacci levels between the high and low:
• 0% = Low (Bottom of the bearish bar).
• 100% = High (Top of the bearish bar).
• Key levels to watch:
• 38.2% → Weak retracement, market may continue down.
• 50% → Balance point, strong resistance possible.
• 61.8% → Potential reversal zone; if price fails to break it, the downtrend may continue.
• 78.6% → If price breaks this, trend may change.

3️⃣ If the market continues downward, check Fibonacci extensions:
• 127.2% & 161.8% → Downside targets if the bearish trend continues.

Confirming Volume Spread Analysis (VSA) for Selling

✅ Sell Entry: If the price retraces to 38.2% - 50% and rejects with weak volume.
❌ Stop Loss: Above 61.8% or the last swing high.
🎯 Targets:
• Break of the large candle’s low.
• Fibonacci extensions 127.2% or 161.8%.

2️⃣ Large Bullish Candle (Bullish Bar)

📈 (Green candle with high volume closing near the high)

How to Identify a Bullish Candle?

✅ The candle has a large body and closes near the high → Strong buying signal.
✅ The volume is significantly higher than previous candles → Institutional Buying (Smart Money Buying).
✅ If volume is high but the candle doesn’t close at the high, it could indicate supply absorption.

How to Draw Fibonacci on a Bullish Candle?

1️⃣ Identify the high and low of the bullish candle:
• High = The top of the candle.
• Low = The bottom of the candle.
• This represents the range of the buying pressure in the market.

2️⃣ Draw Fibonacci levels between the high and low:
• 0% = High (Top of the bullish bar).
• 100% = Low (Bottom of the bullish bar).
• Key levels to watch:
• 38.2% → Shallow pullback, market may continue up.
• 50% → Balance point, potential bounce area.
• 61.8% → Strong support zone; if price holds with weak volume, an uptrend may continue.
• 78.6% → If broken, trend may reverse.

3️⃣ If the market continues upward, check Fibonacci extensions:
• 127.2% & 161.8% → Upside targets if the bullish trend continues.

Confirming Volume Spread Analysis (VSA) for Buying

✅ Buy Entry: If price retraces to 38.2% - 50% and bounces with high volume.
❌ Stop Loss: Below 61.8% or the last swing low.
🎯 Targets:
• Break of the large candle’s high.
• Fibonacci extensions 127.2% or 161.8%.

🎯 Quick Summary: When to Enter?

🔴 Sell:
• Large red candle, price retraces to 38.2% - 50% with weak volume.
• Stop loss above 61.8%, target at 127.2% & 161.8% extensions.

🟢 Buy:
• Large green candle, price retraces to 38.2% - 50% with strong volume.
• Stop loss below 61.8%, target at 127.2% & 161.8% extensions.