Mylan stock with the ticker MYL is a great example of the importance of support and resistance which is a key plank of the volume price analysis methodology as well as one of its five pillars. And in addition, we also have a further aspect of volume which is when it is combined with price action over time to deliver what I call the volume point of control, all of which helps to answer the question we all want answered as traders (and investors) which is ‘where is the market heading next?’
If we start with the various price-based resistance levels there are three strong levels, the first is at $15.80 and shown with the blue dashed line, the next at $16.40 shown with the red dashed line, and finally, a further level at $17.00 again shown in red. These levels are all delivered by the accumulation and distribution indicator and each time a level is tested and holds, the line thickens accordingly and also presents the numerical value alongside. So for this stock to continue higher, these three very strong levels need to be breached which will require effort in terms of volume. Then we turn to the volume point of control (VPOC) itself and denoted with the yellow dashed line. This is the fulcrum of the market and the point at which we can say a degree of price agreement has been met. In other words, there is no strong bullish or bearish sentiment in this area and therefore we can expect to see price congestion follow and which also coincides with the heaviest concentration of volume on the vpoc histogram on the y-axis of the chart.
So for traders or investors looking to buy into the current rally, this is likely to be short lived before the stock runs into these various levels of resistance of both price and volume on the daily chart and MYL is unlikely to develop any momentum until the $17 per share level is taken out which may not be for some time.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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