Tonight's lesson and tomorrow will be on volume:
VOLUME, A FUEL THAT MAKES A STOCK MOVE!
A car needs gas to run. If a car has no gas, it will just sit there and not do anything. So it is with a stock. A stock is a car and volume is the gas that makes the stock move.
Below are some key Zeevian principles to remember about volume.
1) "Volume precedes price. Before you will see a big move in a stock, the volume of the stock will pick up considerably."
From this first principle we see that a price rise with expanding volume is a normal market characteristic and is the way a safe upmove should occur.
2) "When a stock rallies to a new high on expanding volume, but the volume level is less than the previous high, the move is suspicious, and a potential trend reversal could be at hand."
When a stock does not have as much gas as it did on a previous upmove, it tells the trader that the interest in this stock is not there the way it should be and that selling pressures could soon evolve.
3) "Low volume price rises are always suspicious on the upswing, but not in the first 50% retracement of a downmove. From there on it must have gradual volume expansion".
4. "When there is tremendous volume on an uptrending stock and the stock moves up only anemically, it smacks of distribution and a sell-off to the downside follows shortly thereafter"
In investment circles we call this churning. What that means is that a tremendous amount of selling is meeting any buying and that the selling is winning the day. Whenever you see tremendous volume on an uptrending stock and no movement, it would be a good idea to
sell your position and get out. However, remember the word uptrending stock in this Zeevian principle. If a stock has made a significant decline, and you have heavy volume with little price change, this is indicative of accumulation, and is normally a bullish factor.
5."When the volume on a stock in a breakout mode falls off significantly, it is telling you that the stock will soon fall from its own weight."
Out to walk dog.....Mark |
