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-----Original Message----- From: "JsxSniper" <[email protected]> Date: Sat, 10 Sep 2011 14:09:37 To: <[email protected]> Subject: TA - Understanding Volume - Part 1 Understanding Volume - Part 1 Many of our readers have asked for more information on volume, so we decided to publish a complete series on volume over the next four weeks. This series is aimed at giving you fundamental understanding of volume attributes and behaviors. Each week in this newsletter, we will add new information about volume that builds from the previous weeks. Volume in the market is as important as fuel to your car. Price does not move without buyers and sellers. To help in understanding typical volume and price behavior, post these notes beside your computer and learn to identify the different volume behaviors as they occur on your charts. By understanding volume, it will help you unlock profits you might have missed before. Normal Volume Behavior: * Volume is highest before congestion (e.g. channel, pennant flat, triangle, etc.) * Volume is lowest as it moves deeper into congestion * Volume increases with a VALID breakout of congestion and then SUBSIDES as the trend begins. (Look for the last Haweye Pivot being taken out.) * Volume increases in major reversals * Volume goes with the overall trend and dries up on the counter trend; i.e. volume should move with trend strength (trend dots are up and on an angle greater that 45%). * On double or triple top/bottom formations, Volume should be lower on the second double top/bottom formation showing lack of selling. Then volume will pick up and a trend will be established. If it goes into congestion, then it should slow down. Unusual Volume Attributes which show a DIRECTION of price because volume isn't behaving normally: Congestion Areas: * If heavier volume appears at the low end of congestion area, buying is being supported and prices tend to go up after breaking out of the upper price resistance level. * If heavier volume appears at the higher price level in the congestion area, then there are more sellers than buyers. Prices will eventually decline from the higher support area of the congestion zone. * Volume should increase during the breakout then subside as the trend begins to form. However, if volume stays high after the breakout and prices move too strongly, then the breakout will not be valid and prices will move back into congestion until fair value has been established then continue in trend (in other words price has got ahead of its self and it requires attendant volume to confirm trend direction.) * If price retraces after a breakout from congestion on high volume, and bounces off the outside edge of congestion, and then volume picks up again, this is a valid breakout. * Volume should be in the direction of the breakout. However, if volume does not confirm the direction of the breakout, then prices will likely go in the opposite direction. Remember, normal volume breakout increases with the breakout. Therefore, if you see a breakout with low volume, anticipate entering in the opposite direction as price cannot continue in this direction on low volume. JsxSniper FB : jsxsniper TW : @jsxsniper Blog : Jsxsniper.blogspot.com Group : <http://finance.groups.yahoo.com/group/Jsx/> http://finance.groups.yahoo.com/group/Jsx/ OR <mailto:[email protected]> [email protected]
