STOCK GOODIES PLAYS OF THE WEEK

[Black_NITE]

EquiVolume Chart Reversals

High volume moves can also signal the beginning of a trend. Chart 6 shows Alcoa (AA) trending lower from early January to early March 2009. The stock firmed around 5-6 in March and then broke out with a wide EquiVolume box. This was by far the widest box in months. Such strong buying pressure confirmed the reversal and foreshadowed a rally back to the January highs.



The above chart shows Goldman Sachs (GS) reversing an uptrend with three red EquiVolume boxes. The stock surged above 345 in late October, but moved sharply lower with a long-red-wide EquiVolume box in early November. Two more long-red-wide EquiVolume boxes followed as the stock broke support at 210. Together, these three EquiVolume boxes showed selling pressure intensifying. Goldman Sachs managed to bounce back above 235, but these EquiVolume boxes were narrower because of lower volume. Upside volume on the bounce was weaker than downside volume on the support break. Lacking conviction, this bounce failed and the stock moved to new reaction lows over the coming months.