Celera Distribution Foreshadows Breakdown
One of the most potent, yet underused analysis tools
available to traders are patterns of accumulation and distribution in volume.
Many traders believe that the entire story is told in price action and I admit
to having been one of them in the past.
But now I have seen the light.
The following example in Celera
(
CRA |
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Chart |
News |
PowerRating) is just one of many that clearly
demonstrates the edge you get when you understand volume how volume affects a
stock’s near- and intermediate-term directional bias.
Like many genomic stocks, CRA looked promising after its June 6,
2000 breakout. Since that time, companies like Millennium
(
MLNM |
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Chart |
News |
PowerRating) and
Celgene
(
CELG |
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Chart |
News |
PowerRating) had impressive runs. Even those like CRA which lagged
behind, looked promising.
But this past Monday and Tuesday, we had big price plunges in CRA
which coincided with huge surges in volume. This is a telltale sign that
institutions are dumping their shares. CRA sat on support over the course of
Wednesday and Thursday, but volume told us that the damage had already been done.
It’s not a big surprise then, that CRA is breaking down below
its June 6, 2000, support level in Friday’s action because the distribution
pattern hinted at its internal weakness. Can the damage be repaired? Of course
it can. CRA could easily stage a comeback by the end of the session. But if it
does, be sure that volume is there, lending a helping hand.
Have a great 4th,
Eddie