Freeus,
RE: volume.
I realize that others have differing opinions, and that's okay. But I think volume is frequently of critical importance, and so monitor it in a variety of ways. Price action can be very misleading, and may often diverge from true buying/selling pressure. This is important to note, because it indicates that the price move is unsustainable, and the price will regress in the direction of buying/selling pressure. Sometimes this may be reflected in certain technical indicators.
I look at raw volume data, and one thing I like to find out is if volume is accelerating as a stock moves up (or down), and drying up as it corrects. Also, as each low point is reached, does this occur on increasing or deacreasing volume? The implications going forward are not at all the same.
I look at overall market volume via things like the Arms Index ($TRIN, or for the NDX, $TRINQ), which essentially normalizes the advance/decline line for volume; this is important, because if advancing issues outnumber declining issues, but the volume on advancing issues is decelerating while the volume on declining issues is accelerating, then there is really more selling pressure than buying pressure, and prices will reflect that fact in short order. And, the $TRIN will tend to reflect this prior to the price move or correction. I also look at the number of advancing issues times the volume in those issues, compared to the number of declining issues times the volume in these issues. This is a rearrangement of the $TRIN, and sort of dissects out some information which I think is useful. Volume in these tends to move cyclically, and opposite one another. I like to monitor these trends via moving averages.
With individual stocks, another volume issue worth considering IMHO is the recent average volume compared to the usual average volume. This can be a good indication of increasing or decreasing market interest, and one can use this information when deciding how strong and how valid technical signals are. TA tends to work optimally in sectors experiencing accelerating market interest, manifested by daily volumes well in excess of normal. Conversely, as market interest in a sector is drying up, TA will tend not to work as well.
Volume associated with gaps is also important: huge volume several times normal with a gap one way or the other has a much different outlook associated with it compared to a gap occuring on normal volume.
High volume associated with Dojis and narrow range days after a run (up or down) also allows one to place more confidence in the suggestion that the candle marks a turning point in the trend.
Volume as a stock approaches critical support and resistance points can also be very useful information in trying to determine if a stock has enough momentum to make a test of resistance (or support) likely to be successful.
JMVHO, as always......
WS
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