Watchlists and levels are so important when trading or investing in stocks as we are dealing with so many entities which can run to hundreds if not tens of thousands hence the requirement for filtering, whether using settings such as volume and percentages or more visual aspects such as breakouts from congestion. If the latter then this is where the volume point of control becomes important as it defines these areas for us. The vpoc is the area on the chart where price agreement has been met and so congestion follows. What also follows are natural levels of price-based support and resistance that build as the price moves sideways and it is these levels that will then provide the trigger for any valid breakout. In other words, a valid breakout which is confirmed with volume.
The stock with the ticker FOX (Fox Corporation) is one such example. For much of the summer, the price languished around the $34 price point while building a well-developed ceiling of resistance at $34.60 per share which was tested repeatedly thereby making this level ever stronger. Finally, towards the end of September, a surge in volume propelled the stock through this level, with the price action also taking out a second level of sustained resistance at $36 per share and denoted with the red dashed line of the accumulation and distribution indicator.
The stock then continued higher on solid volume to touch a high of $40 per share until the candle of the 8th of October signaled some short-term weakness plus the candle is also topped with a pivot high. However, it is interesting to note the reaction of the last few days with the price easing lower on low volume and is not an indication of sustained selling. More likely it is indicative of profit-taking following the recent strong rally and hence longer term we might expect to see this stock continue higher. However, we are in earnings season with Fox Corp due to report on 2nd November with a consensus EPS of $0.56.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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