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Use High Volume To Spot Tops & Bottoms Like This...

Many traders will often ask me how I spot market tops and bottoms. This is not an easy process as there are many factors that go into the skill. One easy way that many new traders can recognize tops and bottoms is by looking at the volume. You see, often markets will have extremely high volume around an important low or top. For example, if a trader looks at a SPY chart of the low made on February 9, 2018 they will notice a nice bottoming tail pattern with 283.5 million shares traded that day. When you see a bottoming tail pattern with massive volume that is the markets way of talking to us. On that session, the the SPY also hit the 200-day moving average which is sometimes a supporting factor. Remember, a bottoming tail is formed when the equity makes a new intra-day low at the start of the trading day and then reverses and closes near the high of the session. This takes a lot of energy to do and is often a very powerful signal from the market.



Here is another recent example that is not so easy, on October 3, 2019 the SPY sold off on heavy volume only to reverse and close with a bottoming tail. The volume that day was 85.9 million shares which is a little more than average, but the day before that session the volume was 124.5 million shares in the SPY signaling possible exhaustion. So the next session’s reversal day was a solid level to trade against. The SPY also made a higher low on the daily chart and this is a very good indication that the market has made a bottom. There were also several other factors pointing to a major reversal on that session, but even if you did not know anything else you can enter a long trade with a stop below the October 3, 2019 pivot low on a closing basis. Traders and investors must remember high volume reversals are powerful and can be often used to spot tops and bottoms. Obviously, there are many more factors that should be incorporated into this, but this is an easy tip to identify for the beginner chart reader.



Bullseye Trading has logged in 16 consecutive winning trades since it began on September 2, 2019.

See the chart here: https://inthemoneystocks-4977.kxcdn.com/wp-content/uploads/2019/12/78094832_3796443260382017_4431437652742373376_n.jpg