Page 202 - THE MARKET WHISPERER

198 PART 7 - Indicators: The Trader’s Compass

A high volume integrating breakout on the daily chart and a nice technical
breakout in the trading session should succeed, but pay attention to the
pre-breakout volume increase. The problem occurs when many of those
“new hands” feel pressured, and start selling after the price rose by just
15 cents, creating a snowball that within two minutes sends the stock to
a pullback of 38 cents [2]. Many years ago, I, too, would have been among
those feeling pressured, selling at a loss and gaping when the stock turned
back up and reached new highs. Many years of experience later, with
many insights gained into human behavior, on this occasion I doubled the
quantity I bought at $79.89 and enjoyed watching the continuing uptrend.
An amazing trade instead of a burning loss!

How to Interpret Volume in an Uptrend

Since volume increases indicate the trend’s strength, we would want to see
volume increase every time the stock returns to moving in the direction of
its trend. If volume does not grow as the trend develops, perhaps a reversal
is about to occur, which brings its reliability into question.

When trying to decide whether to buy a stock trending up, we need to
examine the behavior of volume at the points of price change within the
trend itself.

Example of Intraday Change in Volume of Akamai, AKAM