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Link to Trend Signals' Q's charts. Today's volume (318507200) was another 'climactic volume' event like Feb 27th (318311808).

Just click the msg# 225 button.

Got this off a google search for 'climactic volume'.

http://www.streetauthority.com/terms/volumedownside.asp

CLIMACTIC DOWNSIDE VOLUME AND SWING TRADING OPPORTUNITY

In the past several StreetAuthority Swing Trader issues we've dedicated this "INSIDE THE BLACK BOX" section to the exploration of several volume principles essential to correct chart interpretation. By taking volume patterns into consideration before making any trading decision, you'll be much more likely to uncover highly profitable swing trades.

Here's a quick look at some of the volume principles we've already discussed:

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Price patterns must always be looked at in conjunction with their associated volume pattern, never alone.
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Careful analysis of the volume of selling that occurred above current resistance will help you estimate how long a stock will stall at that level.
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Well-above-normal volume is essential when separating a true from a false breakout above resistance.
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Well-above-normal volume on the break of a key support level is likely to keep the swing trader from making the mistake of shorting into a deceptive "spring" formation.

This week I want to talk about climactic downside volume and how its retest creates a profitable swing trading set-up. Climactic downside volume will typically occur after one of two circumstances. First, if a stock is in an extended downtrend, then a washout day of very heavy selling may accompany a new low. Second, unexpected news such as a negative earnings pre-announcement or issue of corporate misconduct can create an enormous volume spike. In these cases, institutions are apt to sell first and ask questions later.

Swing traders should be aware that a trend will often reverse, at least temporarily, on a burst of enormous volume. The volume burst signifies that many of the sellers have already gone through the exit door. There is no place for the stock to go, at least in the short term, but up.

The upside reversal off a climactic selling volume spike, while it can be swing traded, requires both patience and a great deal of nimbleness. Residual sellers who have not yet hit the panic button often see this first rally off the bottom as a chance to recoup some of their losses. With this in mind, the first advance off the low is often grudging as the stock runs into selling pressure or resistance.

Eventually, then, a retest of this first low can occur. That second bottom, when you spot it, should be scrutinized very carefully. If volume on the second bottom is far lower than at the selling climax, then the stock has likely found a key support level. If this is the case, then at this point the shares will more often than not reverse off this important support. The nearby support allows traders to set fairly tight stop losses as well.

To confirm this reversal off support you'll want to examine a good combination of indicators. I generally use stochastics and MACD. Stochastics is typically the more rapid indicator and will give the first signal of trend change. If MACD then confirms this signal with a buy signal of its own, then the probability of a tradeable rally is high.

Below is a chart of mortgage lending giant Freddie Mac (FRE). In early June the stock gapped sharply lower, trading almost 60 million shares in a single day (approximately 12X the normal daily volume). Three trading days later, FRE was still trading 40 million shares, as the stock hit bottom just below $47.50. It then commenced a rally that took it back to the bottom of the gap at $55 in early July.

FRE then sold off steadily into early August, again testing the $47.50 level on the first trading day of the month. On this retest, however, trading volume was extremely subdued. In fact, it was under the average daily volume for the period. Such a low-volume retest is a valuable clue that an important reversal could be happening. More evidence should be sought, however, that a turning point has been reached. In this case, FRE gave that evidence.

There were four important clues that a rally was about to occur. First, the stock made its second low with bullish divergence between price and both the MACD histogram and MACD. Bullish divergence occurs when price hits an equal or lower low, yet the indicator moves higher. Second, the stock broke a three-week Intermediate downtrend line two trading days later. Third, stochastics then gave a buy signal and MACD confirmed this signal very shortly thereafter. Ultimately, FRE then rallied back to resistance at the top of the gap.

A low-volume retest of climactic volume sets up the distinct possibility of a reversal rally. When running visual scans of stocks, look for this pattern. Put them on your watch list. If indicators such as stochastics and MACD give buy signals, then you have found a low-risk (and potentially highly profitable) swing trading opportunity.

Good trading!