Volume: How can it be used in trading?

[$20shoes]

Some charts for consideration

First is PLV. Not enough liquidity for some, but it is on alert for me.

Has been sideways for some time, but volume seems to enter as it drifts down to the 41c mark. The last few trading days suggest a renewed interest and the week before showed little supply. My concern is why is the volume so high today when the supply should have dissipated? that is, after a ranging period one would hope that an up day ( that wasn't overly wide) would not need such a forceful amount of volume to shift it. How do you read today's bar?



Second is concerning a gap up in EWC. If you are not on the right side of these trades before the thrust, the less risky play says be patient and see if the supply drys up and possibly wait for signs of demand. This one looks like the supply is dissipating. I would be looking for a test of 46c on small volume.

 

[tech/a]

My take.

How do you read today's bar?

Ill tell you tommorow---seriously!

EWC
Gaps generally lock buyers into their trades below the gap.
This has all of them holding positions and not adding to supply
The bar which gaps and 50% of the gap itself generally creates a trade zone in which trading is enveloped until supply is either exhausted or halts.
Those participating are generally the weak hands or those who take profit from below the gap.
Id be waiting for volume to dry up which it is and take note of tests

31/3 supported by strong buying
7/4 Lack of buyers evident so still in limbo.

 

[roland]

OZL is interesting.

Sellers decided that $1.25 was enough.

High volume, low spread, weak close. Not really a selling climax ?

Last bar looks like we want to hold this level. Average volume, low spread, high close after a low test.

Is $1.20 our new support?

 

[LKR]

Hi everyone,

I am a big fan of VSA, there is defeninetely an art to it though.

From my studies, i have found that analysing charts on lesser time frames will often reveal hidden buying or selling.

Looking at volume bars on dailys can sometimes mirepresent what is actually occuring. Often i will zoom to 5 min charts or less just to check where the demand is kicking in, and at what level supply comes in, and the volume relative.

Also, volume on price levels can often help to represent where weakness lies. Ultimately this is the key, where is the weakness and where is the strenght?

 

[LKR]

NBS view.

CLICK to expand.

P.S i agree with your view.

IMO a strong base is forming, and finally after a long time of following this stock, some strong demand is comming through, finally some support.

Though as tech said it could be months before anything of great importance happens, there has been alot of supply to dry up, alot of locked in sellers.

Also of interest, this stock when it was known as ETC, had previously formed a strong base for many many months, and showed all the charateristics of following through, but failed. I held when it was 38 cents, went to 50 and got stopped out on its way back down. Im happy to hold again now though.

 

[Boggo]

This is another (IFE) that has had a good run but is now running into resistance. Last couple of days showing a positive effort IMO.

(click to expand)

 

[Frank D]

NBS

Ideally a Friday close above 17.5 cents today can help verify further
gains...

Weekly close above April 50% level and breakout of the March
highs....

 

[Boggo]

Thanks Frank.
It seems to be making an effort today so far.

 

[WaveSurfer]

I managed to get a hold of a few disks of trading tools for a reasonable price. It has a copy of TG real-time v3. The guy whom I bought it off transferred his license over to me so I'm currently going through the bootcamp on the TG website. Very interesting stuff indeed.

I'm not using TG with real-time data as of yet, just an EOD feed.

Going through a few charts I came across this one (AXM). I am trying to figure out if it's in an accumulation stage. It seems there was a bit of climatic action back in Sept 2009 and has gone sideways ever since. I'm not too sure what to interpret with the big spikes of volume in Nov 2009 and March this year on each move up. I'm not that convinced it's SM selling into the rallies considering it's only ranging between 2 and 6 cents, lol. But what would I know anyway.

The monthly is a little more interesting with the increase in volume at this level which makes me think the herd is bailing out and the Pro's are buying (very narrow spread bars).

What's your opinion on this one tech? I'm not going to trade it, just spending some time in the charts to identify accumulation/distribution.

First chart is the daily, second is the monthly.

 

[tech/a]

Id call this DYING.

Ill go through some Accumulation /Distribution charts when I have some time to present them
First hint I can give (as you need to identify this when its happening no good in hindsite) Is look for high volume and then work out what its doing.
in the chart above its clearly selling. Do accumulation here--- no distribution either---If you pull up a weekly chart you can see clear distribution in 07/08 at the top. Customary failed double top re test.

Then look right of chart to volume and notice the MASSIVE increase in selling from May 09 till now.
This(AXM) is being DUMPED!

 

[Trembling Hand]

The monthly is a little more interesting with the increase in volume at this level which makes me think the herd is bailing out and the Pro's are buying (very narrow spread bars).

WaveSurfer you also have to apply a bit of common sense to a stock that has traded from $1.20 down to $0.02.

The volume is always going to show an increase. $1000 worth @ $1 is 1000 shares. $1000 @ $0.02 is 50,000 shares. Its not comparable. Different people now playing a completely different game.

 

[roland]

I haven't been able to quickly find a good example of accumulation, but here is one of the examples from Masters of the Market:

Point (a)
We have a wide spread down on high volume, which is normally an indication of weakness (selling pressure).

However, over the next few days the market has not fallen – in fact it is up. If the high volume seen at point (a) had been selling, how can the market drift upwards?

To be more accurate, there was selling at point (a), but for the market to have gone up, the selling must have been 'absorbed' by professional traders.

They will only do this if they have become bullish. In this particular chart, we see the beginnings of an accumulation phase.

Point (b)
We observe an up-bar, but look at the volume: It is low. The market is unlikely to go up on low volume (no demand), which is why the market now moves sideways.

Low volume shows that either:
1. There is a shortage of stock at this price level due to the absorption volume seen at point (a),
OR
2. The professionals who are accumulating stock have withdrawn from the market, as they do not want higher prices – it is too early for them, as the floating supply has not been removed.

You have come to these logical conclusions because of point (a), which had to be absorption of the supply, by professional traders (an indication of strength).

Points (c) & (d)
Are small tests. Note the low volume at these points, which is an indication that the tests were successful and that supply has been removed.

The market cannot go down on low volume. Taken in isolation the actions at (c) & (d) mean little, but because you have seen absorption volume in the background, they now become strong buy signals.

Once you have seen very high volume on a down-day (or bar) on your chart, this shows high activity in the market.

If a rally starts due to the market-makers buying (or absorbing) the selling from weak holders who are being shaken-out on the lows, the market will frequently re-test this high volume absorption area, bringing the market back down into the reversal area (where the high volume was first seen) to make sure that all the selling has, in fact, disappeared.

You will know immediately if all the serious selling has disappeared because the volume will be low as it penetrates back into the old high volume price area. You would be wise to pay attention to this observation because it represents an excellent buy signal.

In summary, to mark a market down challenges the bears to come out into the open.

The low volume of activity shows that there is little selling left from the bearish side of the market.

There is now an imbalance between supply and demand caused by the recent shake-out (at point (a)). If there is little or no supply left in the market, this clearly shows that the trading syndicates and market-makers have been successful in their attempt to absorb selling from the weak holders, and that prices are now set to rise.

 

[roland]

Looks like Apex still has plenty of holders at this level wanting to sell. Small tests down are still giving us heaps of volume.

 

[roland]

OZL may be a reasonable example.

Point A, wide spread down with plenty of volume - indicates supply at this level. A couple of tests down after point A still brings in plenty of volume. Not ready yet!

Point B, same test but nearly no volume. Down test at Point C again shows no volume. No bearish supply left at these levels.

After Point C we have the SP drifting higher on low volume.

Then we get back to the resistance level at $1.25

 

[tech/a]

Small tests down are still giving us heaps of volume.

Other way around

Small tests UP are still giving plenty of volume.
Takes a while to get your head around it!

Here is a good example of what apperas to be one thing is in fact the complete opposite.
Go check out the chart for the remainder of the story.

 

[WaveSurfer]

.....I'm not too sure what to interpret with the big spikes of volume in Nov 2009 and March this year on each move up....

Cool, thanks guys/girls. Dumping of the stock certainly makes sense in regards to my observation above.

A quick search on the company returned this.

Yeah TH, I understand. Thanks mate. Although.... 10,000 shares for a couple hundred.




LOL

 

[tech/a]

Thought Id delve a little deeper into how I use volume and in particular answer this question posed by "Client" on his thread.

OK, let it be zones. So why do you think that those zones are much better then my lines or some other stuff? The price can break those zones and then unexpectedly turn back.. As well as in my cases. And?..

I use support and resistance zones something I have developed over 15 yrs.
These zones are made up of different criteria.

But there is one criteria I find excellent as a Support or resistance ZONE and that's extreme volume. I look for extreme volume and then decipher what it is telling me. If its telling me its buying then we see---support and of course selling --resistance.

To ascertain this we need to look at the bar/s prior to the Extreme volume bar and immediately after the bar this will determine the true meaning of the EXTREME volume and its likely affect on the coming trading.

Below is a random Chart from Tonight's scan.
Ive just looked back and found extreme volume and drawn in the zones.
I think you'll agree they are pretty useful particularly when you see a batch of them either at a base (In this case) or REVERSE at a top.

CLICK TO EXPAND

RED Resistance BLUE Support

 

[tech/a]

And here is the current chart from the Scan.

Care to attempt to interpret this chart?
(mind you to be sure youd need to wait a day or so but what do you think Im seeing?)

Its not one I'll have on the long watchlist.

CLICK TO EXPAND.

 

[tech/a]

Or how about this chart?


HGO
Click to expand.

These examples are of course only one (Different) way to use volume---Ive not seen it in any book including VSA.

 

[roland]

suspect that the last resistance level has not been reached yet