ChartWatchers

EVIDENCE OF DISTRIBUTION

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While persistently rising prices are frustrating the bears and encouraging the bulls, there is evidence that distribution is taking place.

On the first chart I have circled areas where daily volume has scooped below its 250-EMA line, indicating that there was inadequate sponsorship of the rising trend. In each of the first three cases shallow volume preceded price corrections. The current volume dip, which has lasted about six weeks, has yet to be resolved, but it seems reasonable to expect a correction fairly soon, probably starting soon after we see final expansion of volume.

The second chart shows a five-week period of NYSE Member Net Selling, which is a fairly unusual because these insiders are normally accumulating shares into declines (shares that will be sold during the next advance). The NYSE delays reporting of these numbers by two weeks, so there is a big question mark as to what Members have been doing during the last three weeks; however, the large amount of net selling raises a red flag, especially when viewed in the context of the shallow volume problems discussed above.

 

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More
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