Sunday, July 2, 2017

Volume By Price Indicator - Quite A Helpful Tool To Trade Stocks

My readers know that I am not a fan of Technical Analysis in its classic form. However, sometimes I have a look at a few interesting indicators that are not in common use.

Let me take the so-called  "Volume By Price" indicator. According to Stockcharts, this indicator is defined as:

"Volume-by-Price is an indicator that shows the amount of volume for a particular price range, which is based on closing prices. The Volume-by-Price bars are horizontal and shown on the left side of the chart to correspond with these price ranges. Chartists can view these bars as a single color or with two colors to separate up volume and down volume. By combining volume and closing prices, this indicator can be used to identify high-volume price ranges to mark support or resistance"

In my opinion, the Volume by price indicator is sometimes very helpful to find major resistance / support levels. Look at these two charts:


The chart shows the price action of B2 Gold, one of the best gold miners (although most recently in some kind of trouble). Notice that its shares are fighting against a strong resistance at around C$3.9 a share. Interestingly, this resistance level has been disclosed by a long, horizontal bar on the left. In other words, this bar means that vast amounts of shares changed hands at C$3.8 a share.  

Now, another example. This time it is Kirkland Lake Gold, similarly to B2 Gold one of the world's best gold miners:


Here we can easily spot what happens when the shares break their strong resistance level (depicted by a long, horizontal bar on the left). Notice that after some struggle Kirkland shares ultimately broke above their strong resistance at C$10.0 - C$10.5 a share. Since that event the company's shares are appreciating at high speed (the red arrow).

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