Quote from Spydertrader:
It depends. Not to sound flippant, but I find understanding the role volume plays in a particular price trend helps facilitate the decision making process with respect to buy, hold, sell or re-enter. In addition, planning and decision-making should occur prior to the required action step. By example, price has improved exceeding the 10% target. What's next?
Your question illustrates why I place a significant emphasis on reading the background material and the attached documents in the Original Journal. We know from Jackâs Jokari Window when we see decreasing volume in conjunction with increasing price to anticipate an upcoming change in price trend. We also see in Jackâs Jokari Window unchanging price results in a gradual (more or less) price degradation over time (4 oâclock drift).
A review of the 30-minute ANTP chart for 2005-11-14 yields some interesting observations. In the morning, we see both price and volume increasing in tandem with an unchanging volume and (more or less) flat price trend midday. In the afternoon, we see both price and volume increasing in tandem once again. However, if we observe the entire day as a whole, we see a gradual decrease in overall volume as the day progresses (draw a trend line over the volume bars if you have trouble seeing the downward trend). As a result, experience tells us to anticipate an upcoming price trend change.
It appears as if we have conflicting signals, when in reality, we do not. After all, we did already bank a 10% gain. Clearly, we have actual volume exceeding FRV levels prior to EOD, but also (and perhaps more importantly) we have a downward trend with respect to volume. Since decreasing volume combined with increasing price often indicates a change in price trend, we would not re-enter with a long position (unless it was our desire to lose money). In other words, the correct decision-making process is not, re-enter or sit on the sidelines, but rather, hold or sell â a decision made much earlier in the day.
You might want to consider selling half (or three quarters) of your shares allowing the remaining shares to ride out the price fluctuations in an effort to improve profitability. For me, I require confirmation of continuation of both the price and the volume trends before I hold beyond the 10% price target. In other words, increasing price and increasing volume tells me to anticipate a price trend continuation. In such an example, holding beyond a 10% gain has an improved probability of increased profit.
I hope you found the above post helpful.
- Spydertrader
