Combining Price and Volume to Predict Price Movement (Part 2)

In last Week's article Tim Ord wrote about ways to use price and volume to predict market direction. In this article he uses actual stocks to show how this methodology can be applied.

We are now going to take these rules and apply them to stocks.  Remember, we are going to key off of previous highs, lows and gaps to generate signals.  Knowing where gap are, is and important event.  These rules work just as well on high volume indexes.  Low volume equities or indexes have less accuracy.

The first is Exxon Mobil (XOM | Quote | Chart | News | PowerRating).

The trading price and volume rules work on any time frame.  The time frame  for XOM above is the weekly.  In late September and early October 2007 XOM tested its previous high of mid July 2007 on at least 20% lighter volume three different times.  All three weeks XOM failed to close above the mid July 2007 high and triggered sell signals.  This bearish setup is Rule #1.

The next chart is the weekly XOM again but takes in account a third high that developed in late December 2007.  The third high in December 2007 tests the first high of July 2007 on about 50% less volume and closes below the first high and triggers a sell signal.  This chart setup describes Rule #3A.

The next chart shows Rule 6 setup.  A rising gap formed in late February near 112 level on EOG Resources (EOG | Quote | Chart | News | PowerRating).  EOG came down and tested this gap level in late March on much lighter volume and closed above it triggering a buy signal.  The upside target was EOG previous high near the 130 range, which was hit in early April.  Notice that EOG in early April tested the late March high near 130 range on much lighter volume and is a sell signal Rule #1. 

The next chart is of EOG Resources again and shows the setup for Rule #5.  In late November EOG closes below its previous low near 85.5 on 30% lighter volume and implies a false break to the downside.  The next day EOG closes above the previous low of 82.5 and triggers a buy signal. These are some of the Price and Volume rules I use to trade today's markets.

Tim Ord is president, editor and publisher of "The Ord Oracle" established in 1990. His newsletter is a Monday through Thursday email report that trades the S&P, Nasdaq and gold issues. He is frequently listed in the top 10 market timers in the country. If you purchase his book "The Secret Science of Price and Volume" through you will receive a copy signed by Tim.