A Great Example Of Volume Price Analysis On The Daily Chart For Fastenal

Applying the volume price analysis methodology is about analyzing the chart and identifying one of two things and put simply it is this – is volume and price in agreement or disagreement. If it is in agreement then this confirms the move is genuine and all is well, but if in disagreement, in other words anomalous, we need to pay close attention and interpret what this is telling us.  And the daily chart for Fastenal gives us a great example and one that is hard to miss.

The anomaly is, of course, the extreme volume of the 19th March and as we can see clearly, volume and price are not in agreement here, as such a massive injection of volume should have resulted in an equally dramatic move in price, but it has not. So what is happening here?  First, we can see that we are in an uptrend following the sharp reversal from the volatility candle of the 4th of March. This was the trigger that sent the stock back to the volume point of control which sits just below the $48 per share price point and is denoted by the yellow dashed line. So in terms of a trend, we are in a bullish phase and looking to move higher.

On the day in question, we can see the price first moved lower only to recover and close above the open thereby creating a deep lower wick. Our conclusion here is straightforward. If this had been heavy selling, the candle would have closed as an extremely widespread down candle and red thereby confirming that volume and price were in agreement. Clearly, this was not the case, hence we can conclude this is strong buying by the market makers in preparation for the next phase of the campaign which is to take this stock higher and to move firmly away from the VPOC which indeed has since been the case. Now with little in the way of volume or price-based resistance ahead we can expect to see this stock continue to climb higher longer term and on towards $52 per share in the near future.

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