Why It’s Important to Watch Volume
Timothy J. Truebenbach is the
President of True Capital Management and general partner of True Capital
Partners LP, a hedge fund. He uses a disciplined model that trades on the
intermediate-term time frame. For a free trial to Tim’s Nightly Stock Analysis
Report
click here or call
888-484-8220 ext. 1.
The market is off to a great start this month, but there are a
few things that we should take note of.
VOLUME is one thing that needs to be factored in to discount Monday’s large
rally in the major indexes. Simply put, it was lacking. Tuesday’s trading showed
minor gains on heavier volume. This isn’t as bad as a distribution day, but it
isn’t the way I would prefer it.
Chart courtesy of
StockCharts.com
Chart courtesy of
StockCharts.com
We are watching a rotation among leading stocks. Metals seem to be finding
investment dollars once again. Take a look at Nucor
(
NUE |
Quote |
Chart |
News |
PowerRating) which
recently broke out of a base through pivot point, 61.80 and Steel Dynamics
(
STLD |
Quote |
Chart |
News |
PowerRating),
Chart courtesy of
StockCharts.com
Some of the brokerage names such as Merrill Lynch
(
MER |
Quote |
Chart |
News |
PowerRating) and Morgan
Stanley
(
MS |
Quote |
Chart |
News |
PowerRating) are in pullbacks. Publicly traded index stocks are also
consolidating recent gains. Examples include International Securities
Exchange
(
ISE |
Quote |
Chart |
News |
PowerRating) and the New York Stock Exchange
(
NYX |
Quote |
Chart |
News |
PowerRating).
Chart courtesy of
StockCharts.com
Rotation among leading groups is healthy rather than watching a stock go
straight up. Profit taking, pullbacks and consolidations usually lead to higher
prices; especially when coupled with light volume>
Speaking of volume, if it starts to pick up in the major indices when they
decline that will be VERY noteworthy. For now, we remain in a confirmed uptrend
with very little to do but identify leaders offering points of entry and places
to take profits. Enjoy your trading!