|
|
|
|
Aspen offers the following Volume-based studies:
Outside the world of stock trading, the importance of volume is often overlooked. Volume is important when confirming the strength of advances, and it can help to identify potential reversals.
In general, volume should mirror the direction of the primary trend. In a primary bull market, volume should be heavier on advances than during corrections. Not only should volume decline on corrections, but participation should also decrease, and the number of declining issues should not increase dramatically.
The opposite is said to be true in a primary bear market. Volume should increase on the declines and decrease during the reaction rallies. The reaction rallies should also be narrow and reflect poor participation of the broader market. By analyzing the reaction rallies and corrections, it is possible to judge the underlying strength of the primary trend.
High volume can also indicate impending reversal. A high volume day after a long advance may signal that the trend is about to change or that a reaction high may form soon. Some market experts maintain there is a correlation between volume and peaks in the market.
©2008 Aspen Research Group, Ltd. All rights reserved. Terms of Use.