Accumulation/Distribution Line
ADX (Wilder's DMI)
Average True Range (ATR)
Chaikin Money Flow (CMF)
Chaikin Oscillator
Commodity Channel Index (CCI)
Comparative Relative Strength
MACD Histogram
On Balance Volume (OBV)
Price Oscillator (PPO)
Rate of Change (ROC)
Relative Strength Index (RSI)
Stochastic Oscillator
Volume Oscillator (PVO)
Williams %R

print this page
send to a friend


Volume is simply the number of shares traded in a given time period. Volume typically either confirms or does not confirm a price move because it indicates the number of investors/traders “voting” for the move.

If a stock moves up and volume is strong, all signs point towards continued strength. But if prices move up while volume falls off, less “votes” are being cast in favor of the move and a short-term pullback may occur.

But on the other hand, although one likes to see strong volume to support a price move, too much volume is a sign that a reversal may be coming. It is not uncommon to see a huge volume spike at tops or bottoms as either shorts scramble to cover , or longs sell at any cost , respectively.

Low volume simply means there is much uncertainty with regards to a stock's trading activity and future movement. Combined with Bollinger Bands, a period of low volume and little volatility often ends in an explosive move.

When a stock is strong, you want there to be solid volume surges to support the move. This ADIC chart, which was trading flat and then began an uptrend in mid August had several bursts of volume to support the move.

When a stock moves up but volume fails to confirm the move, the stock will often pullback. Volume = votes, and when volume is light, one could say not many traders are "voting" for whatever move the stock is experiencing. Here MMM was slowly moving up but volume was weak. The uptrend did continue, but not until after a pullback.

This is exactly what you want the volume to look like when a stock is rallying. When the stock moved up, volume significantly picked up, and if you look closedly, you can see the blue line on the volume chart moving up too. Volume confirmation is important in identifying strong stocks.





» back to top