The Fattest Bar on Your Chart

Most people see resistance on a chart and back away.

I get it. Price runs into a level, gets rejected, runs into it again, gets rejected again. Why would you want to be there?

Here's when I want to be there.

I was looking at Spectrum Brands (SPB) yesterday and it's sitting right at its point of control, which is just the price where more volume has traded than anywhere else on the chart.

It's where the most shares changed hands, so it's where the most people have a position and an opinion. Price hitting that level is normally where things stall out.

But when something is pressing into the point of control and there's real participation behind it, you're looking at a spring getting compressed instead of a wall.

It's like a jack-in-the-box, and the longer it coils under there the harder it pops when it finally goes, because everybody defending that level has to get out of the way at once.

So I'm hunting for price stuck under something with pressure building behind it, which is a different animal from a clean breakout.

Now here's the annoying part about this particular one.

Spectrum Brands traded a whopping 17 option contracts in an entire session. Seventeen, every one of them bullish.

Which is interesting and completely useless if you want to trade it, and the stock is pretty thin too.

So I'm not in it and I'm not telling you to be.

But go pull up a volume profile on whatever you're watching, which is the histogram most platforms will draw down the side of your chart showing how much volume traded at each price, and find the fattest bar. That's your point of control.

Then look at whether price is grinding into it or bouncing off it, because those are two completely different things and most people can't tell them apart.

When you find one coiling with volume behind it, you've found the jack-in-the-box.

Rock On,

Voz

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