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KALPATARU
TECHNICALS
C-106/B,
KALKAJI, NEW DELHI - 110019 (INDIA)
Tel.: 011- 6295595, 6295596, 6295598- Mobile: 98111-11353
Inquiries and Suggestions from outside Delhi region may be
mailed to
kalpa_taru@hotmail.com
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In the science of Technical Analysis, Volume
plays a role which is as important as any other basic
indicator. An increase in the volume in conjuction with Stock
price moves adds strength and momentum in the direction of the
move. It reflects the market's confidence that the uptrend
will continue in force, or its pessimism that the downtrend
will.
For the market, declining volumes as the market rises
is supposed to warn the end of a BULL MARKET.
Likewise, sharp increase in volumes resulting in Selling
Climax, signals the end of a BEAR MARKET.
An increase in abnormal volume can alert investors to
coming price movements, Up or Down,
before it becomes obvious to the overall market. Therefore,
the market axiom "Volumes Precedes
Price."
Historically, the majority of BULL MARKETS have originated
with atleast two days within two-month period where upside
volume is atleast nine times greater than the downside volume.
Investors who track volume and spot the two-day Exceptional
Upside Indicator can out-maneuver other investors and earn
excess returns by positioning themselves for the coming Bull
Market.
Basic Volume theory includes the
following maxims:
*Increasing Volume with an advance is
Bullish
*Decreasing Volume with a decline is Bullish
*Increasing Volume with a decline is Bearish
*Decreasing Volume with an advance is Bearish
*A Market Top is imminent when heavy volumes occurs with
little or No Gain in the averages.
*Heavy Volume confirms the direction of price breakouts from a
Support or Resistance Zones.
*An increase on heavy volumes after a previous substantial
rally signals a "Blow Off" with an impending top and
Reversal approaching.
*Heavy Volumes accompanied by an accelrating drop in prices
confirms a "Selling Climax" and impending price
reversal after the panic selling subsides.
*Low volume periods after upward price reversals reflect a
Consolidation Phase before resumption of the Upward Movement.
The Daily Volume Indicator measures extremes in the Supply/
Demand relationship. If a Stock closes at the mid point of its
trading range for the day, the indicato reflects no change.
Closing Price above or below the trading range midpoint show
an increase or decrease in the Daily Volume Indicator,
respectively.
In constructing the Daily Volume Indicators, Technical
Analysts take into account the day's volume, closing price,
Distance between closing Price and the mid point, and the
Trading Range.
These are just the basic characterstics of the Volumes, these
must be read in conjuction with other commonly used indicators
before drawing up any conclusion.
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