Just a quick update to note today’s gap up open, new high for the move, then reversal to close lower, engulfing the prior day’s body, all on higher volume. This is called distribution+. One day of distribution is usually nothing to get too concerned about unless it comes during the first few days of a rally, however multiple days over a short period of time (a few weeks) is cause for concern and cash raising. This chart shows five distribution days over the past two months and two over the past one week (see red circles marked above volume bars). That’s distribution in a rising market, which is interesting. Other points of note are:
1) The wedging up action of the past couple of days’ rally, prior to today’s distribution. See purple lines marked on price and volume charts. That’s not what you want to see of you are a bull. You also don’t want to see the first day of volume pickup, i.e. today, be a gap up open, new high for the move, then reversal to close lower, engulfing the prior day’s body-kind of day.
2) The breaking of a recent low in the Money Flow indicator (highlighted in purple in the lower chart window). This divergence with the price action is a yellow flag. It really just shows the information I described above, except shows it in line form.
Tune in next time to see how this plays out. Until then, remember there is a yellow flag waving… no time to be a hero to the long side… might be a time to look for a few shorts to enter. Cheers!