A second example of volume price analysis in action on the daily chart for Walmart

Walmart with the ticker WMT is another US stock that exhibited classic signs of weakness around the same time as Pfizer, but what is interesting here is the recent injection of volume which appeared last week, but more of that in a moment.

The mini-rally of August was positive for the stock, taking it from the VPOC at $140.70 per share, through stiff resistance as denoted with the red dashed line of the accumulation and distribution indicator at $142.75 per share and on higher before we see the first of our warning signals on candle 1. We can see there is good volume, but it is a weak candle with a deep wick to the upper body. In other words, Wyckoff’s third law of cause and effect is not being met.

Further efforts to rally follow on higher volume before we arrive at the long-legged Doji candle, which is not in itself a sign of weakness but one of indecision. However, after the early signs, can not be considered a good news candle. The following day, the earlier weakness is confirmed but on lower volume. Candle 2 is weak and closes well off the highs of the session.

There then follows two further warning signs, with the two candle rally accompanied with falling volume. In addition, note the first of these, widespread and up, but the volume looks rather light for such a move. Next comes the two-bar reversal, (an upthrust on a two-day chart) and the price begins to slide lower with the attempt to rally on falling volume confirming the weakness.

Finally, we arrive at this week, and last Friday’s massive volume spike, a further clear anomaly confirming heavy selling into weakness with the candle closing with a deep wick to the upper body, validated on Monday, with a second attempt to rally failing yesterday.

However, before we become too pessimistic there are two saving features for this stock. First, a strong platform of potential support is now in play and denoted with the red dashed line of the accumulation and distribution indicator at $142.60 per share and second the approach of the VPOC which is denoted with the yellow dashed line. Both should be enough to see the downward slide brought to a halt in the short term, and longer-term we can expect congestion to build around the $141 per share area.

Finally, as mentioned in my post for Pfizer always carry out a background check for any stock for earnings, insider dealings, options, short interest etc. using a site such as Market Beat. And on checking Market Beat we discover so far this month directors and major shareholders have sold almost half a billion worth of shares. They have a free service which will give you more than enough information. Also, pay attention to what is being said on social media and whether the stock is attracting more attention than usual.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading