Proctor and Gamble (PG) was a stock I flagged back in January this year as a potential short when it was trading around the $134 per share price, and I’m delighted to say it is one that is still delivering as we can see from the daily chart with the price trading pre-market at $124.29, so a nice return. Yesterday’s price action was particularly profitable as the price plunged to a low on the day of $121.82 before recovering to close at $123.53.
However, there were two other factors to take from yesterday’s price action. First the volume and second the volatility trigger which together go hand in hand. So what does this tell us? First, whilst there was heavy selling on the day, there was also a degree of buying by the market makers as they moved in to buy and denoted by the wick to the lower body of the candle. Second, this price action triggered the volatility candle on the day and as such we can expect one of two things to happen, particularly given the associated high volume, either congestion or a full-blown reversal. We witnessed much the same towards the end of January when a similar volatility candle then saw this stock move sideways for the early part of February as it traded within the price range of the candle as expected before the two candles towards the end of this phase signaled the development of the next stage. These two candles marked one and two on the chart are strong signs for both day traders and options traders to consider selling short or puts. So a weak picture overall for the stock and should we see a break below the $122 per share price, expect this stock to deliver more to the downside.
By Anna Coulling – charts from NinjaTrader and indicators from Quantum Trading
Read one of your books and it furthered my analysis on the market – I hope to read more. $PG definitely showed signs of a topping out volume before reaching a selling climax. A few weeks ago, I exited some trades after realizing weak buying sentiment and MMs propping prices to exit shares on the time&sales. After seeing some stopping volume a few days ago, today, I noticed a multitude of stocks with high volume forming a hammer candle on the daily. I entered a few starter positions that were well into oversold territory – and will continue to watch for some consolidation/reversal. I thankyou for giving me the confidence in trading with conviction. I will continue learning from you!
Hi Joe – many thanks for your kind words and much appreciated and delighted you are finding success – regards Anna