Lets look at the charts. Let's identify some similar patterns and hope we can apply what we discuss today in the similar charts. Do remember that, Technical Analysis is not 100%. The most important elements for Technical Analysis for me is the Price Action and the Volume.
To recap the important points, Price Action is the most important because the delta/difference is the one determines whether we are earning or losing. The Price Action needs to be supported or validated by the Volume. Volume reveals activity. Volume reveals the truth behind the Price Action. Volume validates Price.
1. BIOHLDG
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BIOHLDG Daily Chart |
Notice the spikes which i draw with a blue spheres. The spikes in the price are validated by the spikes in the volume. The price action is aligned with the volume. And notice after that, the volumes are low and the price is hovering around that area. Those who created the spikes are normally not retailers, they can be market makers, fund houses or institutional investors. In short, i will call them "they". Once they spiked up the price and volume, they will wait. Wait for a few days or weeks to wash the impatient retailers away before creating another spike.
Then, those retailers who sold the stocks will regret because they sold it too early. This phenomena is very normal for them to wash away the retailers. Question, how do we know that they are still in these counters? Well, if they had sold all their shares, we will see a similar spike of volume but the price will be falling down, creating a bearish engulfing. But what i discuss here might not be true, maybe some of them will sell partially day by day. We can never know what they are thinking, because we are not them.
Understand the example given? It's okay. Now, lets look at other examples.