ACOR and volatility go hand in hand

ACOR was one of the stocks we looked at in yesterday’s day trading session on the NinjaTrader platform and it’s certainly an interesting one to consider when viewed on the weekly chart. As always, when selecting stocks for day trading one of the many factors to consider is how volatile the stock may be both in terms of implied and historic volatility, but also more directly in terms of the price action and its relationship to average true range. For ACOR we have several classic examples where the price action on the week has moved outside the average true range, and so the volatility indicator has been triggered, as denoted by the two purple arrows, one at the top and the other at the bottom of the candle. When such events occur and accompanied by extreme volume, the expectation is that subsequent price action will then revert inside the spread of the candle, either into a congestion phase, or potentially a full reversal, and this has certainly been the case with this stock over the last year, with the most recent occurring last week. Since September last year the weekly price action has been punctuated with such events with the price action moving sharply in one direction, only to reverse over the following weeks.

Last week’s price action is almost a mirror image of that of mid November 2017, which saw the stock price fall from $28 to $16 before recovering all this loss early in 2018, and given we have another volatility indicator signal, the stock price looks set for a recovery in due course. As always any move higher will need to be accompanied with rising volume, with the first target to breach being the minor resistance level in place just below the $18 price point, and thereafter a second just below the $20 per stock region. In addition we also have sustained volume regions from the current price level and up to the volume point of control in the $24 price level where the price of this stock is likely to congest again once reached.

By Anna Coulling