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An example of trading with volume

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Nick Radge

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I've been bullish LEI since last September. This has been in the face of alot of bearish broker's opinions.

The setup here is quite straight forward for those that can analyse volume. The first day marked broke higher but closed lower. One may immediately think that this was a false breakout. The problem is that it closed well off its lows and did so on high volume. This can only mean that buyers kept it off its lows. If it was selling volume then it would've closed on its lows. Secondly, if it were true selling then the next day it should have continued lower. It didn't. It actually traded up off its open and closed on its high, again on very high volume. Buyers are in complete control. Yesterday saw a good volume increase and another close on its high. Buyers still have the upper hand. I'll be removing half the position a little over $20.00 if it gets there.



These are my current trading positions in this account.

 
Nick,
May I hazard a guess that you entered MRL on a similar premise to BPT? ie very high volume up days (instos) followed by low volume down days, prices stepped up in ledges, currently retracing on low volume towards previous ledge resistance. A general move up from a base formed last year.
 
Most of my entries are based on strong volume factors. MRL was stopped out today, but that happens. The important thing to think about, especially with the likes of the LEI example, is that there are some larger buyers who are not scared to be buying at these all-time highs. That's a very important element. Large buyers who are attempting to accumulate a stock will only pay up if they beleive they won't get it cheaper. If they think they can get it cheaper they will wait, that's why you get very long periods of sideways price action at times.

Take a look at BBG. You'll see a long sideways period. Just recently though that accumulation is now taking place closer to the top of the larger range. Why is this happening? Most likely because those that are accumulating were not getting their fills at the lower levels so they stepped up some more. When they have accumulated as much supply as they can, then prices will naturally start to rise without them driving higher.
 
Here is the BBG example discussed above. Obviously not all are as clean as this. The stop is now at $13.44, just under that seconadry accumulation area. If you find area's like this where a transition from seeling to buying occurs, then its a great place to start building a longer term position.



This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.
 
GP,
BBG had a hiccup yesterday. Take a look at the volume.

Here is another example of volume showing a transition from sellers to buyers. Let me say that there was zero chance of picking yesterdays move. I had picked up the volume change a week or so ago, but suggested that a SELL was certainly not on the cards as a continuation of the trend simply because that volume clearly indicated someone was keen to accumulate the stock. Funny how it seemed to happen just before the company suggests they've turned the corner...hmmm. The issue I have with this chart now is that whilst yesterdays volume was extreme, it appears to be more a reaction rather than a measured rise after accumulation (EXL shows a measured rise after accumulation as a better example). The close yesterday was also off the highs whihc means a few people were also quick to get out and run.

 
Phase1: Market is accelerating lower on higher volume. Bearish.
Phase2: Volume dries up. Decline slows. Sellers exhausted. Turning the corner.
Phase3: Price starts to reverse. Volume starts to pick up. Buyers have most likely go the upper hand.

Yesterday was a buy day when prices broke above Wednesdays high, although I would suggest this strength will be limited.





This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.
 
hi Guys,

I'm no genius at the game, but may I suggest that all is fine and maybe correcting right now it certainly seems that way with the present activity, my stock characteristics are very similar when they have everthing going for them.

Hang in there...and they will come through again. Remember stocks always come off their highs and correct themselves, give you a good idea if you have caught a bull or a bear. And thats how you do your shopping.

Nick you may have just caught the right flight,but got of off at the wrong stop be patient. (How much$ was your ticket?)

Stock'ie'Bailz

Allways off the highs and correcting
 
Check out the volume on MIG - could signify a reversal.

MIG dropped to a low of 3.20, but the low price was rejected on high volume (currently 3.31, 21M shares traded, 3.28pm)

My thoughts, YMMV. We'll see how it closes.
 
Hullo Nick,
Although this not right on topic & could have been answered from your site I think others would be interested in your answer.

Although I do my own analysis when deciding to buy, sometimes I'm not sure if I should go ahead on some buys?, would you give a yes or no answer with no other information to a buy query ?.

What I mean is I pay you for ( yes or no, ) nothing else .

Time reply to be considered regarding costing .

Regards Bob.
 
Bobby,
Theoretically yes but what you're asking is known as Personal Advice and therefore it introduces some paperwork such as issuing a Statement of Advice for every single trade advised on. There are ways around it to turn it back to General Advice though. Example:

Personal Advice - "Nick, should I buy XYZ here?"

General Advice - "Can you analyse XYZ?"

Clear as mud?

Weird,
No problems. I'll post some more in due course.

N
 
Thanks Nick,

Think I got it !.

General Advice-- Can you analyse ??? your answer ( NO ) .
Can you analyse ### your answer (YES ).

If I got this right did I see through the Mud ?.

Bob.
 
Nick and Bobby:

Could one or both of you kindly provide some sort of quasi translation for those of us (well, at least me) who fail to see through the mud in this exchange?

With thanks
Julia
 
Julia,

My interpretation is that analysing a stock could be considered general comment, even if it does give a strong indication of whether the stock is worth buying or not, whereas an explicit statement that the stock is or isn't worth buying would be considered advice.

GP
 

GreatPig,
All I can say is I do like your interpretation skills.

Bob.
 
Personal advice is specific advice to an individual, such as:

"Julia and Bobby. You should buy XYZ"

When personal advice is involved I am required to know your specific financial situation, goals and risk tolerances. I take that data into account when giving advice and issue a Statement Of Advice outling all aspects of the advice given.

General advise is exactly that, general in nature and to nobody in particular but it still involves a recommendation or an attempt to influence an individual into an investment decision.

"I think XYZ is a great buy"

With general advice I am not required to know the situations of the individual but must come with the appropriate disclaimer that appears at the bottom of my posts.

In both instances the indivdual must be licensed for one or both types. Not all people who are licensed can give personal advice. When a person gives any type of advice without a license they are essentially breaking the law.
A web site such as www.smrt-trader.com would be pushing the envelope because they could be seen to be influencing an individual and therefore giving advice.

Most educators get around the issue by using historic examples and not real time. A historic example can not be acted upon by an individual whereas a real time example could be. Where an individual buys software that specifically tells them what and when to buy/sell, then the software vendor must be licensed as well.

ASIC is attempting to remove the onus from the individual and place the responsibility into the hands of the service provider.
 
Hello Nick,

I would be interested to hear your opinion of Thomas N. Bulkowski's interpretation of volume. I have only recently started working with it in the last few months but so far I have found the results quite interesting.

-Ann
 
Hi Ann,
I'm not aware of his volume analysis. Is there a reference on the web or is it in his book?

Here is a weekly chart of WES with another volume indicator I use called Volume Thrust (VT). VT measures the strength of an assault on a high or low. If the 2nd attempt at a low has a significantly higher VT reading then the chances are that prior low will get broken. If the VT reading is significantly lower, then the chances are that the prior low will hold. You can see here that the secon low has a reading some 50% higher, 66.5 vs 40.2. The bounce that followed had small associated volume indicating weak demand (and its also a micro flag). Last week was a 2-bar Key Reversal week on high volume. Not a good sign and one that suggests to me that WES will trade lower.





This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.
 
Hi Nick,

It is covered in his book Encyclopedia of Chart Patterns. Very interesting book.

Well worth a look.
 
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