Jun 15, 2007

Volume at key areas

One thing I've been really focused on the last two days - almost like I rediscovered this - is the relationship between price and volume at key areas of support or resistance. Say I'm in a trade and I enter short above the OR low, which I often do, and price moves towards the OR low and I start seeing some weakness. Sometimes my reaction is 'Get the f out... the sky is falling... abort, abort, abort!!!" However, now I look to see if there's an increase in volume at the key area (say the OR low) and if there's a bullish candle that forms soon afterwards. The screenshot below of ADSK from yesterday shows a good example of what I'm talking about:

  • Red arrow shows increase in volume at the OR low
  • The candles following this increase are not bullish and that's a signal for me to stay with the trade until I get a bullish formation
  • Price continues to drop downward, hit the fib. ext where I sell and realize I fumbled as price dropped even further

Here is a short from the other day (AA) where price fell to the OR low, volume increased and a bullish candle formed afterward. I did get out... and save myself a lot of losses. I probably should've reversed my position at that point.

  • Red arrow shows increase in volume near OR low (support)
  • Very bullish candle formed afterwards which was above the 5ema and then price took out that high


Robert said...

The last 2 charts aren't showing up.

OONR7 said...

robert... what browser are you using? I don't have any problems. Anyone else experiencing difficulties?

Anonymous said...

same here last 2 charts are not showing up. my browser is ie7


KC Equity Trader said...

I also cannot see the charts. Browser IE6 for me but I am about to download Mozilla Firefox, for other technical issues, and will see if that works.

KC Equity Trader said...

I can no see that using Mozilla Firebox as my browser.

http://mozilla.com if you want to load it for free.

Volume is important. I find that if price trends for a while and there is a wide range bar, the quick long movements promotes profit taking and people starting to take positions in the other direction. Buying and Selling programs also kick in.

OONR7 said...

not sure what to do as I haven't done anything different from the other charts. Could be a blogger thing. I'm going to try and repost the images.

KC... welcome to Firefox and I agree with your quick long movement statement.

OONR7 said...

OK... I think the charts are showing up in IE now. At least IE6 works. Sorry for that, I should check with IE to see if the charts appear from now on. Or... you all could switch to Firefox - which I highly recommend.