Volume analysis confirms price movements from "summary" of Charting and Technical Analysis by Fred McAllen
Volume analysis plays a critical role in confirming price movements in the market. When the volume of trading activity increases along with a price movement, it serves as validation that the price change is significant and not just a random fluctuation. For example, when a stock price rises on high volume, it indicates strong buying interest and conviction among market participants. This surge in trading activity suggests that there is a broad consensus among investors that the stock is worth more, leading to a sustainable uptrend. On the other hand, if a price increase is not accompanied by high volume, it may be a sign that the rally lacks conviction and could be short-lived. Conversely, when a...
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