What Volume Bars can tell you about a stock

I am a big believer in making sure that the probability of success for a trade is as high as possible. I am sure as a trader, or investor, you have this as a goal as well. To accomplish this, it is imperative to have a keen focus on trade entry – whether this be in a Dip Buy or even a Break Out trade. Whatever tools that can be utilized to hone this process is worthy of a look.

One simple way to look at the probability of price movement is by reviewing the Volume Bar type/size on a Daily chart. To illustrate, let’s take a look at the Daily chart on $TWC:

What do you notice for the month of September? You have 7 Green bars in a row, as price drifts up. Then there are 2 Red bars in a row, as price consolidates. Now we have 5 Green bars in a row leading up to today, as price Flags/Consolidates here.

Since crossing the 20 Simple Moving Average, the Bulls have been very interested in taking a position in this stock. What is more likely now, what is the higher probably action for price? If it Flags further what do you do?

4 thoughts on “What Volume Bars can tell you about a stock

  1. Assuming you bought on the late July dip, probably take a little off here until the next flag resolves itself. Finger on the trigger, though.

  2. i’d sell calls against it here.
    stochastics have rolled over, and RSI is overbought.
    looks close to the point where all the ones who wanted in have got in,
    ergo buying may dry up soon.
    also SP is at the top of the 1 year trendline.

  3. IMO, of more import is a stock that has a relatively flat volume for a considerable period of time and all of a sudden in the last week volume is up with no noticeable ‘massive’ price change. That’s an indication of stealth buyers/sellers in advance of ‘news’. For example, take a look at the chart and associated volume for So African platinum miner $ATL : http://finviz.com/quote.ashx?t=ATL&ty=c&ta=1&p=d&b=1

  4. Keep in mind that this concept is just a mechanical approach to trading. No other consideration to entry/exit beyond volume bar counts.

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