Focusing on price and volume individually can spell out key information to us in the market. In this article we will look at combining the big picture on price and the Accumulation / Distribution index (which is a measure of volume). NCP has shown some strong signs that are hard to ignore and it will bring together a few concepts together that have been covered in a few of the Trading Tutor articles.
NCP formed a low on the 11th of March this year. Now we have seen strength in the market out of the March low and NCP has followed suit. However the last two trading weeks have shown a more sideways tendency, begging the question where to from here? Utilising the analysis skills of price and volume and combining them together we are drawn to the bigger price picture on NCP, and volume with its part to play.
We will look at two charts on NCP the first is the daily and the second is weekly.
Daily Chart NCP
This daily chart shows the Gann retracement tool. It is highlighting that NCP is currently bouncing around the 50% line in price but is managing to hold above this level. The 50% line was a very important level in Gann’s analysis. Lets combine this with the Accumulation/Distribution Index that compares volume and price together. I use this to measure whether the market is accumulating (buying pressure, index moving up) or distribution (selling pressure, index moving down).
NCP is holding just on or above the 50% line showing quite good support around this price. The relative volume of late has been low on NCP and combine this with selling pressure as seen in the Accumulation/Distribution index, the bears have tried to force the price of NCP below that 50% line but aren’t having to much success. So in my mind this may form a strong point from which NCP can build from. Lets take a look at the weekly chart to see if it confirms this view.
Weekly Chart NCP
Again on the weekly chart NCP is holding on or above the 50% line. The Accumulation /Distribution index is signalling selling pressure. The key concepts to gauge here is that price support is holding against volume pressure, always a good sign.
Both the daily and weekly are in sympathy. Tom mentioned in an earlier article that retracement trades might form a good option in the coming weeks. The market has rallied strongly of the March lows; at some time the market must retrace and give back some of its gains. Maybe NCP is consolidating itself and forming a base for the next big move?
Good Trading
Aaron Lynch