Shares in Avery Dennison have been rising steadily throughout 2019 driven by good fundamentals, excellent acquisitions and a strong presence in the emerging markets until the technical picture prevailed, driving the price off the highs of $116, and closing yesterday’s session at $106.83. And whilst some of this bearish sentiment can be attributed to the short term weakness in the primary indices, it is the technical picture on the weekly chart that is the primary driver for this downside momentum, with volume price analysis once again revealing the picture.
And the starting point is the classic building block of support and resistance delivered by the accumulation and distribution indicator from Quantum Trading on the NinjaTrader platform. The indicator delivers these levels automatically, but more importantly these are both pinpoint accurate and also define the strength of such regions. Each time a level is tested from above or below and holds, the line thickens to represent this fact automatically, and on the chart, we can see the strength of resistance at $116.30 which capped the most recent rally for the stock in mid-April. This level is denoted with the blue dashed line and one which was also responsible for a similar reversal in July last year. The two bar reversal of early April was a classic signal of weakness to come and which has duly appeared with the price action now approaching the volume point of control at $104.80 denoted with the yellow dashed line.
The volume point of control represents the fulcrum of price agreement and as such we can expect to see price consolidation in this region. Below at $102 we have a strong level of potential price support denoted with the blue dashed line which may provide a temporary platform. However, if this is breached, a deeper move lower will follow through the low volume nodes below.
The support and resistance aspect of price is then confirmed with the volume analysis. Note the volume associated with the three up candles as the stock moved from $109 to $116. Three average to low volume bars suggesting a market which is exhausted. Indeed two of these candles were wide spread and up and yet the volume looks lightweight and is therefore anomalous. On the move lower we see volume increasing on the down candles thereby confirming this weakness. This weakness in the uptrends and rallies is also evident through 2018, where each rally runs out of steam with volumes falling away and reversals then taking hold, a pattern now being repeated in the current price action.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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