Complete Volume Analysis

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  1. Volume provides an independent evidence of price trend, continuation or reversal. Volume is measured in trends and the trends are always interpreted in relation to the recent past. Volume Trend Lines are used for comparing Price Trend with the Volume Trend.
  2. Volume normally goes with Trend. It is normal for Volume to expand with rising prices and contract with declining prices.
  3. Price Rise accompanied by contracting volumes warns of a potential trend reversal in price.
  4. Price Rise accompanied by rising volume but lower level of activity then the previous rally warns of a potential trend reversal.
  5. During Bullish trends, it is normal for a peak in prices to be preceded by a peak in volume, but correction after the peak must be on contracting volume.
  6. In an Exhaustion Move, Price & Volume expand slowly, gradually developing into an exponential rise with a final blow off stage. Following this move, both, price & volume fall off speedily. If this phase is followed up with a high volume fall in prices, Trend is reversed.
  7. In a Bullish Trend Reversal, Price Advances following a long decline and then react to a level at, slightly above or marginally below the previous low; it is a bullish sign if the volume on the second low is significantly lower than the volume on the first.
  8. Record volume coming off an important low usually signals an impending rally & similarly, a record volume coming off an important high usually signals an impending decline.
  9. In a Bearish Trend Reversal, a bearish Breakout from a Trend Line or a Moving Average occurs on heavy volume.
  10. In a Selling Climax, Prices fall for a considerable time at an accelerating pace, accompanied by expanding volume. A price rise after a selling climax is always accompanied by lower volume. After this low volume price rise, high volume price rise is observed, without which, the rally looses its momentum.
    Selling climaxes do not necessarily signal the final low for the move but are almost always followed by a rally.
  11. Anemic Price Rise: When the market has been rising continuously, an anemic price rise (small upward movement accompanied by higher volume) indicates churning action & is a bearish factor.
  12. Anemic Price Fall: When the market has been falling continuously, an anemic price fall (small downward movement accompanied by higher volume) indicates churning action & is a bullish factor.
  13. Volume at the Trend Points: Higher volume at the Trend Points makes the Trend Line or the Moving Average a stronger Support or Resistance than the Trend Points with lower volume.
  14. Stable range bound price movement and abnormally heavy volume following a decline represents accumulation, if prices breakout of the range with heavy volume.
  15. Use of Sequential Time Frames is necessary for better understanding of Volume Trend Analysis.