Volume-weighted average price, or VWAP, is the ratio of total volume traded divided by the total volume traded for a chosen time frame.
VWAP is an important indicator for intraday trading, as it graphically tracks the average price of a stock relative to the traded volume.
The goal of the indicator is to provide traders with insight into a trend, and the value of a security. Similar to moving averages, VWAP reflects a bullish sentiment when prices are above VWAP, and bearish sentiment when prices are below VWAP.
This allows traders to identify support or resistance levels.
VWAP is calculated by multiplying the sum of the price by volume, divided by total volume. To break it down further, VWAP is the dollars traded for each transaction, multiplied by the number of shares traded, divided by the total shares traded.
Essentially, it helps a trader determine if they've chosen a good entry point, confirming a trend to buy or short.
Using it practically:
- Stock price moves above a previous swing high
- Identify the confluence area between VWAP and a 50% retracement level
- Buy a possible rejection of the confluence (buy/sell signal) level
- Stock price moves below a previous swing low
- Identify the confluence area between VWAP and 50% retracement level; sell a possible rejection of the confluence (buy/sell signal) level
According to Benzinga Pro, many popular or high volume stocks are nearing a VWAP breakout. We’ve gathered a list:
- GameStop Corp GME
- Bed Bath & Beyond Inc BBBY
- Lucid Group Inc LCID
- Nikola Corp NKLA
- Roku Inc ROKU
- DocuSign Inc DOCU
- Cleveland-Cliffs CLF
- Marathon Digital Holdings Inc MARA
- DatChat Inc DATS
- Fisker Inc FSR
- Datadog Inc DDOG
- Palo Alto Networks Inc PANW
- Newegg Commerce Inc NEGG
- GoodRx Holdings Inc GDRX
- Upstart Holdings Inc UPST
- Moderna Inc MRNA
- CrowdStrike Holdings Inc CRWD
- SmileDirectClub Inc SDC
- Affirm Holdings Inc AFRM
- Minerva Neurosciences Inc NERV
Photo courtesy of Fisker.
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