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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Scrumpy who wrote (44081)6/11/1999 6:04:00 AM
From: lee kramer  Read Replies (1) of 120523
 
SCRUMPY: Nice post. A few thoughts on volume; volume is probably the indicator with the most myths attached...i.e. "volume should be expanding during a break out to new highs". Sure, volume might increase AT the old highs by traders and others who sell part or all against the old highs. But once a stock is IN new high ground, volume can be moderate...because the only selling is coming from "profit-takers"...those who are sitting with profits...and at new high ground EVERYONE is holding profits. Thus, it doesn't take all that much volume to continue the up trend...just more "Buy" orders than "Sell" orders. Contrast this with a stock that has dropped say from 150 to 100. Lotsa folks sitting with losses. Every time the stock pops up a bit it gets "hit" with overhanging stock for sale...it takes time to work this off. PFE and NTBK and many others are in this boat at the moment, although what I've said does not preclude some nice trading bounces.
Another myth; "Don't worry, the stock may be moving lower, but the volume is light". In a down market (be it a stock or the general market) light volume can continue for a long-time...as the "stock" or market continues to erode.
Volume should always be viewed in context; a stock that has dropped significantly on light volume should be watched if volume begins to expand sharply. This often is a precursor to a trend reversal. The same is "true" for stocks that have had a nice run up then begin to "stall" on unusually high volume; often a precursor to a temporary or final top. Look at a bunch of charts and check out the volume during the moves up or down and the volume at the "tops" and bottoms. T/A is as much "art" as science. No hard and fast "eternal" truths...just signposts suggesting lines of probability. (Lee)
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