Interpret What Price Will Do After Volume Spikes
The chart example below with a daily view, shows that High Frequency Traders caused a huge white candlestick and volume spike, as indicated by the vertical red arrow on the right. Since then this stock has been in a sideways price action that has slowly slipped down to the previous highs support level, which is underlined in black and indicated by the horizontal red arrow.
What has happened is that High Frequency Trading buying volume triggered Smaller Fund Volume Weighted Average Price orders. This caused the indicator Balance of Power which tracks large lots versus small lot activity, to spike green as seen in the bottom chart window.
The weekly chart view below shows far more information, that can help a trader determine which trading style to use, for example whether Swing or Position trading would be best. Swing Traders and Position Traders use completely different entry signals, support levels, and exit techniques.
Knowing which trading style to use for this particular stock makes all the difference in whether the trade will be successful with high profits, or if it will have weak profits or a loss.
Martha Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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