One of the questions I am often asked about volume price analysis is whether this approach can be applied to pink sheet stocks. The short answer is yes. All that’s required is volume and price and we can then analyze the chart in the same way. A pink sheet stock may be more volatile, particularly if the volume and liquidity are low, but the principles remain the same.
One such example is Energy Fuels Inc (NYSE:UUUU), a uranium stock. Like many in this sector, it has seen an uptick in interest over the summer months, a fact that is confirmed on the chart when we consider the associated volume with the rally of late August and September. It was a rally founded on the double bottom at $4.40 and confirmed with the platform of support on the accumulation and distribution indicator and denoted with the blue dashed line. Once resistance at $5.80 had been breached and the price had progressed through the low volume node, the volume builds nicely as we advance towards the VPOC denoted with the yellow dashed line at $7.02 and then on towards $8.30.
At such a point. it’s always important to view the price action in the context of other timeframes. In this case, it would be weekly. Using multiple timeframes is, of course, a key concept of both volume price analysis and classical technical analysis. As we can see once we consider the weekly chart, there is a clear signal of weakness, with the shooting star validated by the highest volume on this timeframe. This confirms the rally had come to an end, at least for the time being, as the stock now looks set to return to $6 per share where the VPOC resides on this chart.
Rounding off on the theme of volume and its application to pink sheet stocks, note the crescendo in volume that occurred back in November 2020, as the breakaway rally developed from the $2 price range following a heavy phase of consolidation, breaching the strong resistance denoted with the red dashed line. This provided a solid platform of support for the move higher.
As mentioned in previous posts, it is always a good idea to check the fundamental background and metrics for the stock. For this, I always use Marketbeat.com.
We have some interesting data points, the most noteworthy being the extent of short interest in this stock, which stands at almost 9% of the float as of the Aug. 31, a slight reduction from earlier in the month but still significant. Whether this attracts the attention of what I like to call retail, activist traders for a short squeeze remains to be seen.