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Vodafone Idea - Algorithmic Trading Activity Traps the Short Sellers

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The beauty ofPrice Action Tradingis that, its simple at the same time its also in-depth. When you strip down all the unwanted indicators and just focus on the Naked Price chart, it can reveal many things. One such interesting revelation took place recently on Vodafone Idea Stock prices.

Price Action pinpointed theAlgorithmic trading behaviorand how ittrapped the last batch of uninformed short sellers. Take a look at the Price Action Analysis on the 1D chart of Vodafone Idea.

Vodafone Idea Price Action Analysis on 1D Chart

Vodafone Idea - Algorithmic Trading Activity Traps Short Sellers

Its a well-known fact that most of the companies in Telecom sector are struggling to keep up with competition. Due to the same reason, the share price of Vodafone Idea Ltd is on amulti-year downtrend. If you look at the Weekly chart you will notice that share prices are declining since the beginning of 2018. The company has already lost of its market value.

But at the same time, Algorithmic trading activity has increased in the stock. How do I know that? Well, take a look at the significant increase in trading volume Just a couple of months back, the average volume of the Stock was300 Million, but from last 3 4 Weeks, volumes have increased significantly up to1. 8 Billion!

Not only that, between9th August to 18th September, share prices were trading in a narrow and tight consolidation range, along with Rising volume. Professional Traders will call this type of Price action asRe Absorption Phase. Its a reflection of Black Box Algorithmic trading activity, similar to what I have mentioned inHFT Compressor Pattern.

Another interesting fact is, notice how thedownside breakoutfollowed by the Re Absorption phasefailed drastically. Uninformed sellers, who initiated short positions on the breakout got trapped and forced to square off their positions due to the sudden upside reversal in Price Movement.

The sharp unexpected Upside price movement we see now is the result ofAlgorithmic Activity that has trapped uninformed Short sellers. Its interesting to see how algorithms are becoming more and more sophisticated in Financial Markets.

SoImportant lessonfrom this chart for Traders like us Is to understand the importance of Price Action, How Algorithms and High frequency machines can impact the Price Action and finally, never be an Uninformed Trader.

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About the author

Balaji is a Trader, Investor and Self published Blogger. He wrties frequently on his website Balaji is specialised in applying systematic Price action trading strategies and Global Macro techniques on financial markets such as Equities, Dervatives, Futures and Bonds. He is well versed on both International and domestic markets and has trading experience of more than 8 years.  
As a trader his core purpose is to generate superior risk adjusted returns on consistent basis by applying Flexible risk managment combined with a Postive expectancy of Price action strategies. He writes passionately about Technical analysis, Trading strategies, Price Action setups and Global macro events. 
Apart from trading and Blogging, Balaji also mentors aspiring traders, Investors on becoming succesful in highly competative financial markets. He offers permium trading course on which he covers Price action trading methods, Institutional trading strategies and Macro trading.

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