# Technical Analysis from A to Z

by Steven B. Achelis

VOLUME

Overview

Volume is simply the number of shares (or contracts) traded during a specified time frame (e.g., hour, day, week, month, etc). The analysis of volume is a basic yet very important element of technical analysis. Volume provides clues as to the intensity of a given price move.

Interpretation

Low volume levels are characteristic of the indecisive expectations that typically occur during consolidation periods (i.e., periods where prices move sideways in a trading range). Low volume also often occurs during the indecisive period during market bottoms.

High volume levels are characteristic of market tops when there is a strong consensus that prices will move higher. High volume levels are also very common at the beginning of new trends (i.e., when prices break out of a trading range). Just before market bottoms, volume will often increase due to panic-driven selling.

Volume can help determine the health of an existing trend. A healthy up-trend should have higher volume on the upward legs of the trend, and lower volume on the downward (corrective) legs. A healthy downtrend usually has higher volume on the downward legs of the trend and lower volume on the upward (corrective) legs.

Example

The following chart shows Merck and its volume.

Prices peaked at the end 1991 following a long rally. This was followed by a price decline (trendline "A1"). Notice how volume was relatively high during this price decline (trendline "A2"). The increase in volume during the price decline showed that many investors would sell when prices declined. This was bearish.

Prices then tried to rally (trendline "B1"). However, volume decreased dramatically (trendline "B2") during this rally. This showed that investors were not willing to buy, even when prices were rising. This too, was bearish.

This pattern continued throughout the decline in 1992 and 1993. When prices rallied, they did so on decreased volume. When prices declined, they did so on increased volume. This showed, again and again, that the bears were in control and that prices would continue to fall.

*Technical Analysis from A to Z*is reproduced here with permission from the author and publisher.

### Contents

- Preface
- Acknowledgments
- Terminology
- To Learn More
- Bibliography
- About the Author
- Technical Analysis
- Price Fields
- Charts
- Support & Resistance
- Trends
- Moving Averages
- Indicators
- Market Indicators
- Line Studies
- Periodicity
- The Time Element
- Conclusion
- Absolute Breadth Index
- Accumulation/Distribution
- Accumulation Swing Index
- Advance/Decline Line
- Advance/Decline Ratio
- Advancing-Declining Issues
- Advancing, Declining, Unchanged Volume
- Andrews' Pitchfork
- Arms Index
- Average True Range
- Bollinger Bands
- Breadth Thrust
- Bull/Bear Ratio
- Candlesticks - Japanese
- CANSLIM
- Chaikin Oscillator
- Commodity Channel Index
- Commodity Selection Index
- Correlation Analysis
- Cumulative Volume Index
- Cycles
- Demand Index
- Detrended Price Oscillator
- Directional Movement
- Dow Theory
- Ease of Movement
- Efficient Market Theory
- Elliott Wave Theory
- Envelopes (Trading Bands)
- Equivolume/Candlevolume
- Fibonacci Studies
- Four Percent Model
- Fourier Transform
- Fundamental Analysis
- Gann Angles
- Herrick Payoff Index
- Interest Rates
- Kagi
- Large Block Ratio
- Linear Regression Lines
- MACD
- Mass Index
- McClellan Oscillator
- McClellan Summation Index
- Median Price
- Member Short Ratio
- Momentum
- Money Flow Index
- Moving Averages
- Negative Volume Index
- New Highs-Lows Cumulative
- New Highs-New Lows
- New Highs/Lows Ratio
- Odd Lot Balance Index
- Odd Lot Purchases/Sales
- Odd Lot Short Ratio
- On Balance Volume
- Open Interest
- Open-10 TRIN
- Option Analysis
- Overbought/Oversold
- Parabolic SAR
- Patterns
- Percent Retracement
- Performance
- Point & Figure
- Positive Volume Index
- Price and Volume Trend
- Price Oscillator
- Price Rate-of-Change
- Public Short Ratio
- Puts/Calls Ratio
- Quadrant Lines
- Relative Strength, Comparative
- Relative Strength Index
- Renko
- Speed Resistance Lines
- Spreads
- Standard Deviation
- STIX
- Stochastic Oscillator
- Swing Index
- Three Line Break
- Time Series Forcast
- Tirone Levels
- Total Short Ratio
- Trade Volume Index
- Trendlines
- TRIX
- Typical Price
- Ultimate Oscillator
- Upside/Downside Ratio
- Upside/Downside Volume
- Vertical Horizonal Filter
- Volatility, Chaikin's
- Volume
- Volume Oscillator
- Volume Rate-of-Change
- Weighted Close
- Williams' Accumulation/Distribution
- Williams' %R
- Zig Zag