OPINION: Does The Lower Volume Mean They Stopped Accumulating?
This almost belongs on the TA thread, but I'll put it here since there's some general comments as well.
One thing that I've observed is that peaks in volume often correspond with either short-term peaks or valleys in price. This is usually on the day of or the day following the volume peak. When it is followed by a decline, it is usually a 3-5 day decline. (This is all just from observation in a few stocks--I may be seeing things that aren't there!) I was very tempted to play this one by selling some of my position on Thursday and buying back next Tuesday or Wednesday. I didn't sell any more, since I had already gambled that we wouldn't break through 20. I'll be watching, and next Wednesday will likely buy back the 1/3 of my position that I sold.
The declining volume leads me to a question. Why did the volume decline? Are the buyers through accumulating? This is a question that really concerns me. If they are, we may drop back down into the 17.5 - 20 range for a few weeks.
That's one possibility, but I'm not confident that it's the right one. Here's another senario to think about:
I'm sure that the buyers had a quantity and price in mind as they started accumulating. If they are accumulating a large quantity, it makes a lot of sense to choose a price just over a major resistance point for the bulk of their accumulation. As they approach the resistance point, they are able to buy from a large number of sellers (the shorts for one, and people like me who were gambling that it would bounce instead of break out). Once they break through, they'll still be able to do some accumulation, but the price will temporarily be out of their hands as it is run up by momentum players, people gambling that the breakout will go higher, and smart shorts covering. Then, if they play their cards right, they'll provide declining to level support, letting sellers chase them down to the price they want to buy at. There are many who will sell as the price starts to decline. Depending on the quantity that they are accumulating, they may keep it here for a while, allow it to jump up and down a point to shake out more sellers, or whatever. This might appear as a basing period. If they have a very large position to buy, they may even let it drop below the old resistance level and repeat. To avoid a huge runup, they will only buy what the sellers are willing to sell, though. Only when the sellers at a particular level dry up would they raise the ante. As they near completion of their position, they might buy at a faster pace, forcing the price up and allowing it to base at a higher level.
Is this what's going on? I'm not sure. If we see the price linger here in the 20 - 20 1/2 range (rather than dropping), I would tend to think that it's a possibility. If the price drops, I think we can rule it out. I think we'll know by Tuesday or Wednesday, in either case.
(Accountability information) I'm long on IOM. I sold 1/3 of my position right before the breakout, gambling that it would bouce. I will probably be on buying the shares I sold back on Wednesday.
- Michael Coley
- i1.net |
