Questions about the VWAP (false breakout, double bottom etc.)

[Teruki 21]

Hi there,
I have a couple of newbie questions about the VWAP.
Thank you in advance.

First question is about the false break out. I understand the concept but my question is does it have to "break out" once?
What if a stock "tested" the VWAP but just could not break through above or below it? Is it (usually) not good enough to predict it would reverse?

Another question is actually similar to the first one. In the chat room the other day, Andrew said the stock he was talking about (I don't remember which) was forming a "double bottom" and there was a good chance it would go up.  I looked at the chart and it did look like a "double bottom" but it was near the VWAP. What I understand is when talking about "double bottom" it is usually about the reversal toward the VWAP but it wasn't. The stock was going down toward the VWAP and could not break it twice, forming a "double bottom" shape. In this kind of a case, it is likely it would go up (similar as my first question) and if so, forming a "double bottom" around the VWAP can be a good indicator as well?     

Thank you.

[Abiel 475]

On 5/4/2020 at 3:33 PM, Teruki said:

does it have to "break out" once?

According to VWAP reversal strategy in Andrew´s books, yes. A stock that breaks VWAP and can´t keep going and goes back to VWAP is a signal for selling it short. Watch volume, usually these breakouts happen with low volume. 

 

On 5/4/2020 at 3:33 PM, Teruki said:

Another question is actually similar to the first one. In the chat room the other day, Andrew said the stock he was talking about (I don't remember which) was forming a "double bottom" and there was a good chance it would go up.  I looked at the chart and it did look like a "double bottom" but it was near the VWAP. What I understand is when talking about "double bottom" it is usually about the reversal toward the VWAP but it wasn't. The stock was going down toward the VWAP and could not break it twice, forming a "double bottom" shape. In this kind of a case, it is likely it would go up (similar as my first question) and if so, forming a "double bottom" around the VWAP can be a good indicator as well?     

In these cases it is better to attach some chart screenshots for a better explanation. Very strong stocks with a catalyst could be this case, where price returns to VWAP and finds support there and goes back up. Again, is important to see strong volume on the upside breakout as a signal of the reversal. 

[Teruki 21]

Thank you Abiel and sorry it took me a bit to reply.
Sorry I don't really remember which stock Andrew was talking about that day.
I will pay more attention to Volume.

Thank you again.