Classic VPA in action for OKE stock

Over the last two months, we have seen classic volume price analysis at work for this stock which is now developing the trend lower as a result.

The starting point here was during the first week in March, as the stock price began to fall, the market makers stepped in on high volume, driving the price well off the lows and closing with a deep wick to the lower body of the candle. The following week saw further buying with the rally then developing through the end of March and into early April. But look at the price action and volume. First the spreads on each candle narrow each week, with the volume falling in concert. A strong signal of weakness ahead with narrowing spreads and falling volume. Then comes the selling in mid-April and into May. Here again, note the volume and price relationship and the polar opposite of widening spreads and rising volume, confirming the weakness as the price waterfall develops and a classic reversal develops.

So where next for the stock? Given the bearish sentiment now developing, from a technical perspective we have a low volume node now on the horizon which extends from $64 all the way through to $61. Once the price penetrates this region, it is likely to gain further downwards momentum, with a possible repeat of the price action of last year which saw the stock retrace the test the volume point of control at $56.

By Anna Coulling

Charts from NinjaTrader and indicators from Quantum Trading