Low-volume days are bullish.
Once upon a time, I thought low volume up days were a sign that strength was waning, that momentum was petering out. I’ve since been disabused of the notion, and the chart below tells you everything you need to know about just how bullish those low volume rallies can be.
Here are a few key takeaways to today’s volume-focused message.
First, volume is secondary to price. If a stock rises 1% on low volume, you get paid the same as if it had risen on high volume.
Second, high volume up days are known as accumulation days and suggest institutions are gobbling up shares. These are bullish too.
Third, high volume down days are known as distribution days and reveal institutions are selling shares. View these as red flags.
Fourth, just because high volume days are bullish doesn’t mean that low volume days are automatically bearish. Above-average participation often occurs during corrections and downturns. Low volume usually accompanies extended uptrends.
Fifth and final, a lengthy low volume period can often indicate that there is no news worrying investors right now. Thus, prices push northward.
Chart of the Day
Never Short a Dull Market
The dark blue line shows how SPY performed over the past decade on above-average volume days. The green line shows how it performed on below-average volume days. Notice the grand canyon of difference?
Video of the day
Coach Frank’s Charts
Coach Frank always brings us some beautiful charts to look at. Check out the segment starWatch this clip from Friday’s Halftime Report where the coaches analyze Frank’s charts and discuss their potential trading setups on stocks like Microsoft, Trimble, Starbucks, Amphenol, WestRock, and Linde.
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