Question

Dear Anna – I am a great fan of yours. I have purchased ur books on forex and the complete guide to vsa. Based om the guide book, it says that when it is downtrend or uptrend volume should be increasing to justify for the move. Look at netflix chart, with the earnings reported on 22th july 2014. The price tank with ultra high volume. However yesterday’s volume is low and it is down. Can this be considered as analomy? May I have your view for this stock? Will it be go higher or will it tank? – Regards

Answer

Hi – many thanks for your email and always lovely to hear from one of my ‘fans’ – I am very touched. With regard to your question about Netflix I will do my best to answer this for you. The first point to make is that this stock was recommended as a buy by Goldman Sachs earlier in July which is generally a precursor for a move in the opposite direction, that duly occurred with a spike in volume but only accompanied by a modest rise in price. Moving to the volume of the past few days, the stock indeed currently looks relatively bearish with the high volume of 22nd July signaling weakness and a move through the 430 platform of support. Subsequent volume has been average, but then so too has been the price action so no particularly anomalies on the daily chart, thus far. And any move through the 415 region is likely to see further declines in due course.

Moving to the weekly chart, the picture here confirms the current bearish tone with the two bar reversal of mid July self evident, coupled with rising volume on last week’s candle suggesting a deeper move lower and possibly back to test the support level in the 375 region. In summary, on both the daily and weekly charts there is little evidence of any buying (stopping volume) at present, and as such this stock may slide lower in due course. For anomalies we are generally looking for high volume with a narrow spread or a wide spread on low volume, and at present we have neither of these scenarios.

Finally, when considering any stock this needs to be read in conjunction with its’ sector along with the broad context of market sentiment as reflected in the index. As you know all the major US indices are currently in a consolidation phase as traders and investors wait for the much vaunted ‘correction’. It is also interesting to note that on the monthly chart that the price action has run into an apparent area of resistance in the 450 region, and the recent bullish trend higher from early 2013 has been accompanied with a decline in volume as this stock runs out of steam at a potential pause point or reversal. This last point also emphasizes the importance of viewing any instrument in more than one time frame. I hope the above helps and thank you for sending in such an interesting question – kind regards Anna

By Anna Coulling