Volume profiling provides unique insight into the profit-and-loss position of recent investors by identifying price levels at which significant buying and selling have occurred. Areas of high volume can act as powerful support and resistance levels because they represent prices at which a large number of investors have established positions and are therefore likely to defend those positions or exit them if prices return to those levels.
Equally important are the low-volume price ranges where little trading occurred. These areas have the potential to create price gaps, where prices can move quickly with little friction.
In the graph below, the red line, aka the POC (Point of Control), indicates the price level with the most volume within the visible price range. The gold and blue colors indicate whether the volume was up/down (blue for up volume and gold for down volume). The color coding helps better understand whether the buyer or the seller initiated the transaction. The darker bars represent 30% of the volume since the April Liberation Day lows.
The current volume profile analysis highlights that many investors are trapped in the market with losses. We suspect the market will encounter resistance all the way up to new highs as these investors, who are losing money, seek to exit their trades at no profit or with a slight gain or loss. Below 630, the volume starts to thin out. This means there are not many buyers willing to add to their positions to provide support. Said differently, it could be a slippery slope lower if new buyers are shy.
Nike: Good Earnings But Bad Guidance
As we share below, had a better-than-expected quarter. However, as shown in the graph, Nike shares are down 14% and at their lowest levels in over ten years.
- Revenues: $11.28B (est. $11.24B)
- EPS: $0.35 (est. $0.31)
- Gross Margin: 40.2% (est. 39.8%)
A weak forward outlook is the impetus for the sharp decline. Nike’s CFO Matt Friend expects fourth-quarter sales to decline 2–4%, well below Wall Street’s estimate of a 2.0% increase. Moreover, he cautioned that a 20% decline is expected in its key market in China.
He also discussed geopolitical uncertainty and higher oil prices as potential headwinds to both input costs and consumer demand. The weaker-than-expected guidance raises new concerns about management’s ability to improve the company’s fortunes.
Tweet of the Day
