How to understand volume in relation to value increase or decrease (cash, stocks)

[GuitarInnovations]

I understand that volume can indicate a trend in one direction or another, but are the following scenarios possible and what would they indicate?


1) volume lowers and the value of the stock goes up


2) volume lowers and the value of the stock goes down

[bmw335xi]

Originally Posted by GuitarInnovations

I understand that volume can indicate a trend in one direction or another, but are the following scenarios possible and what would they indicate?


1) volume lowers and the value of the stock goes up


2) volume lowers and the value of the stock goes down

1) low buying pressure, but even lower selling pressure
2) low selling pressure, but even lower buying pressure

Low volume selling isn’t concerning
Low volume buying could be concerning

[GuitarInnovations]

Originally Posted by bmw335xi

1) low buying pressure, but even lower selling pressure
2) low selling pressure, but even lower buying pressure

Low volume selling isn’t concerning
Low volume buying could be concerning

So both of those situations could potentially be problematic?

[GuitarInnovations]

Originally Posted by stonks

Record cash on the sidelines. Nothing to worry about. Rocket fuel for a massive bull market run.

I don't mean in a general sense, but specific to how you monitor a particular stock to know how it is performing.

[bmw335xi]

Originally Posted by GuitarInnovations

So both of those situations could potentially be problematic?

It all depends on context... when a stocks breaks out, you want to see big volume because it increases the chance that institutions are buying rather than retail traders. Or if you own a stock you don’t want to see down days on big volume because it increases the chance that institutions are selling rather than just retail traders. You aren’t going to see big volume every day, so context matters.

[BigCityDreamer]

Originally Posted by GuitarInnovations

I understand that volume can indicate a trend in one direction or another, but are the following scenarios possible and what would they indicate?


1) volume lowers and the value of the stock goes up


2) volume lowers and the value of the stock goes down

#2 is often a good sign, because it indicates that selling for that stock has been exhausted.

According to William O'Neil, the stock has a good chance of going higher afterwards on increased volume as institutional buyers come in.

bmw335xi, isn't this what they call a base and pivot?

[sandlines]

Low volume? It's meaningless. Falling volume happens when there is no news and no particular reason to trade.

The reality is that many things have no meaning and don't predict anything. Human nature is to find meaning in everything. Someone notices that a stock went up three times in a row after falling volume and they will think there is a correlation there. But in reality most of these things are just coincidence.

[bmw335xi]

Originally Posted by BigCityDreamer

#2 is often a good sign, because it indicates that selling for that stock has been exhausted.

According to William O'Neil, the stock has a good chance of going higher afterwards on increased volume as institutional buyers come in.

bmw335xi, isn't this what they call a base and pivot?

A base is when a stock moves sideways and a pivot is break out above the base. However, the pivot can happen within the base too if you see tight price action followed and then a break out, this is called a cheat entry coined by Mark Minervini.

[GuitarInnovations]

Originally Posted by bmw335xi

It all depends on context... when a stocks breaks out, you want to see big volume because it increases the chance that institutions are buying rather than retail traders. Or if you own a stock you don’t want to see down days on big volume because it increases the chance that institutions are selling rather than just retail traders. You aren’t going to see big volume every day, so context matters.

Thanks for explaining.

[BigCityDreamer]

Originally Posted by bmw335xi

A base is when a stock moves sideways and a pivot is break out above the base. However, the pivot can happen within the base too if you see tight price action followed and then a break out, this is called a cheat entry coined by Mark Minervini.

OK, I thought the volume ideally dries up on the right side of the base.