|
PureBytes Links
Trading Reference Links
|
>
> I have been thinking about volume lately, and it seems that volume in a
>strong trend decreases when the trend is about to reverse?
NOTE: The following blurb is specific for the stock market, that's our
specialty:
I've noticed that sometimes you'll get a breakout and several days up in a
row on declining volume.
That's an accident waiting to happen.
Or a lot of times after a good upmove you'll see several days where the
volume increases but the price tries but barely goes up (churning, just like
brokers do with your equity <g>). That indicates heavy selling into a
rally. The subsequent correction COULD really tank but on the other hand
the volume could decline, the price could tighten up and it could try going
up some more. Tops are hard to spot since there will be numerous bouts of
selling on the way up.
Oh yes, another possible top is a key reversal on increasing volume. But
like any possible top its best to watch the reaction to see if it follows
through down.
When it comes to bottoms about 1/2 the time the volume will climax, but
then a lot of other times it will dry up. A key reversal up on an increase
on volume is pretty effective whe it happens, but they don't all happen
this way.
After a sell-off you want to watch the basing pattern form. Generally the
bigger the selloff the longer it will take to base around. There will be a
few zig-zags, retests and rallys that sputter after a few days.
If it's really going to resume going up it will begin by following through
a week or two after the "final" low.
IMPORTANT: It will follow through (if it does) by having a great big up day
on INCREASING volume. This is important. Also, apparent followthrough on
the first or second day after the low can be EXTREMELY DECEPTIVE. Maybe
just "short covering", who knows? But its definitely best to wait for the
third day or later when looking for the followthrough move. Many times
right when it should be following through it will get hammered again. It's
best to wait.
When it comes to commodities in general the problem is the actual volume
isn't available until the next day. Many services report yesterday's volume
in todays slot. Could be the same prob with OI but believe it or not I
haven't looked into this.
I hope this gives people some ideas.
regards,
phil
|