I was teaching recently at a seminar and one of the students was asking about the importance of VOLUME when looking at share price movement.
Take a look at the snap-shop of the FTSE below:
Download FTSE-20-09-05.jpg
Notice I have drawn a horizontal resistance across the top of the previous HIGH. Those of you that have attended my seminars will know that for the share price to break through this level a certain amount of momentum is needed. This is generally represented by an increase in VOLUME which represents an increase in market interest which is a reflection of MOMENTUM.
If you look where I have drawn the two arrows - yesterday when the price started to break through the previous resistance, volume increased and guess what... the index moved to another level.
Whether you are looking at an index, a stock or an ETF the principle is the same. Increased volume is a positive Signal of momentum in the direction of the move.
BUT remember - you should also be looking at your other indicators too!!!