I have simplistic charts because I have simplistic methods. I want to share with you a trade technique that I use that I've found to be very successful. One way to look at the complexion of a chart is to utilize volume by price bars. Before launching into more narrative, let me put up a chart:
A few key points:
- The stock has made a significant relative high
- The stock has traded in a 2-month range with very high volume during this time frame.
- It has a 6% short float over the past couple of months.
This might be a stock that you might consider putting on a watch list as it might be at or approaching an intermediate level to short. My point is not to recommend this stock as a short, but rather to demonstrate how looking at volume by price bars can give you a dimension of information that is not otherwise readily apparent.
Here's another chart, COST, that has another promising (VbP) configuration:
Remember, this set up works on the long side too. Here's a chart of FTWR, as stock that I have a long position in.
I want to share one last chart with you. It is a Renko chart. I posted a link to this chart back when I originally created it in September, 2009 of the NYSE composite. I believed the lack of VbP air pocket above would suck the price upward. (I note that I could have easily been wrong, but this chart was part of my 'weight of evidence.'
There are no sure things when we look at charts, but VbP information adds a dimension to your chart review that may help you see opportunities and/or hurdles that you might have missed without the volume profile
Position: long FTWR.
