Keycorp with the ticker KEY is representative of many which are approaching key levels in terms of either support or resistance following a period of congestion and for this particular company, it is the $21 per share price point which is at an interesting level for several reasons.
Waiting for stocks to break away from congestion regions can be a frustrating business and does require patience, but which is generally rewarded, and a common theme of such price action is how the patterns of support and resistance develop around the VPOC. The volume point of control is the yellow dashed line on the chart and is the fulcrum around which price oscillates back and forth with no definitive bias. It is this constant price action which then creates and develops the price-based regions of support and resistance and in this case, these regions are created automatically by the accumulation and distribution indicator. On this chart, we have several with a heavy blue dashed line alongside the VPOC providing a very strong platform of support as we move higher, whilst above, we have one at $20.50 per share which was breached yesterday, and a second approaching at $21.00 per share which is now key and if this level is breached, two things happen.
First, price-based resistance becomes less significant as we only have minor levels from $21 per share to $23 per share and it is not until $23.35 that we find a stronger level denoted with the blue dashed line. The significance of the $23.35 price point is that it has been tested and held on four previous occasions and it is one of the beauties of the accumulation and distribution indicator which presents these lines according to their strength. In other words, the thicker the lines the stronger, and vice versa. Second, as we move beyond $21 per share, volume on the VPOC histogram falls away dramatically thereby presenting little in the way of resistance from a volume perspective. Remember, volume acts in the same way as price from a support and resistance perspective.
So in summary, if this stock takes out the $21 per share price level, it should have a clear run towards $23.50 per share before hitting further resistance.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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