If price is king, then volume is the queen that is able to heavily influenced the direction of price. Analyzing volume is important because volume often point us to huge moves in a stock before it happens.
Here are some reasons why you should look at a stock's volume:
In the next few articles in this chapter, we will delve deeper into volume and its effects on stocks. Below is a sample to give you a taste of how unusual volume can move a stock and the market.
In the chart above, you can see how CBS suddenly had a very unusual volume during one week. This volume was higher than normal. The volume was about 9X more than the usual trading volume!
This hinted of huge selling by some interested parties and smart money. Not long after that, the stock dropped. About a year later, the stock lost almost 40% of its value.
In the chart above, you can see how an unusual volume formed on the daily chart of SPY. SPY is the etf of S&P 500. There was a very large bullish bar on heavy volume which hinted of aggressive buying by market participants. The stock market had a huge bull run in the next 3 months.
That's the power of volume analysis!
May 05, 22 10:24 AM
What is the market doing and what is it likely to do?
Apr 27, 22 09:01 AM
As we enter April, will we continue to move higher or will there be a correction coming?
Apr 13, 22 11:46 PM
Apple is one of those stocks that we should look at almost every day. The reasons is because it is a component of the Dow Jones, the S&P 500 and the Nasdaq.
Apr 12, 22 09:38 AM
Here are a list of stocks that are at their 50 MA and 200 MA. The 50 day moving average and 200 day moving average can be a support area where stocks bounce off
Apr 12, 22 09:34 AM
Here are a list of stocks that have broke out or about to break out. Breakout stocks can often give us a good reward to risk ratio.