Southwest Airlines: Classic Volume Price Anomalies
Anna Coulling | Feb 07, 2022 07:18AM ET
The pattern of price behavior for Southwest Airlines (NYSE:LUV) is one we are seeing on many stock charts at present with weak efforts to rise being followed by reversals and all played out against the framework of volume price analysis which reveals the truth behind the price action. In this case there were two anomalies arriving in a short period last week which would have alerted stock traders and investors to the impending weakness. So what were they?
First, note the price action of Jan. 28/31 along with that Feb. 1. The first is a deep hammer candle arising Jan. 28 with a very deep wick to the lower body but look at the volume which would seem to be anomalous given the range of the move. This is followed by an even more curious day, where we have a wide spread up candle on what we can only describe as average volume. The price spread is wider than any equivalent benchmark candle on the chart yet the volume is almost half, so another clear anomaly.
Finally, we arrive at the candle of Feb. 1 with volume falling for the third day. So not only do we have a stock rising on falling volume, that volume is anomalous in its own right and as such little wonder the stock duly reversed off the VPOC (volume point of control) at $45.
Moreover, even if this had not been the case, any approach to the VPOC would have sent a strong signal that a pause and congestion would be likely. However, when taken with the associated volume profile in the move, a reversal more likely which was duly delivered.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.