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Markets are gearing up for a busy earnings season with key plays in software, travel, transportation and chemicals [tap to join us for Profit Panel]
Most traders struggle with one critical question: Where exactly should I take profits?
I’ve been working on a technical analysis approach that helps solve that problem by using volume profile data to identify natural resistance zones that align with calculated profit targets.
The concept centers around what I call volume shelves — price levels where significant trading volume has accumulated, creating predictable support or resistance zones.
When your profit target naturally coincides with a volume shelf, you’ve validated both the target’s realism and identified where to expect selling pressure.
The HUN Setup Structure
Let me walk you through a recent analysis on Huntsman (HUN) that perfectly demonstrates this methodology.
While examining the chart, I identified a critical volume shelf that served a dual purpose — both as a resistance zone and a logical profit target.
What stood out immediately was that the profit target sat right at the top of the volume shelf. That alignment matters because it confirms the target is realistic and highlights where meaningful resistance is likely to appear.
Even if the stock pushes through the volume shelf, it would likely face resistance at that level. Since that’s where the profit target sits, the trade still works.
The strength of this approach is the layered thinking around resistance. The volume shelf represents the first hurdle. If momentum carries through, there’s room for the stock to run toward the next target.
Risk Management Through Volume Analysis
What makes this methodology powerful is the built-in risk management.
You don’t need perfect execution. Even partial penetration of the volume shelf achieves the objective because that’s where the profit target is set.
That creates a natural buffer — the chart structure does much of the heavy lifting.
The process is straightforward:
- Identify the volume profile
- Locate price levels with heavy historical trading activity
- Mark volume shelves above current price
- Align those levels with profit targets
When those elements line up, you get a trade thesis supported by market structure, not guesswork.
Market conditions matter too.
When capital rotates into safer names or more predictable setups, volume shelves become even more important because they highlight where conviction previously showed up.
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To better trading,
Alex Reid
WealthPin
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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