Volume is an important aspect when doing a technical analysis because it can be use to define a trend. Transaction volume is a total of shares that is traded everyday. It said that a strong price movement influence by high volume of transaction. As an example if a stock increase 5% in a day caused by a high volume of transaction, the price will climb up in the next day. If the volume is below average, it will be too hard to reverse the trend. Volume should be move align with the trend. For an example if the price goes up while the transaction volume is lower it is a sign that the trend will come to an end. A low volume transaction is a sign of less interest of market to buy and it is a sign of consolidation period (price moving reversal) A higher transaction volume is more secure. It is a characteristic of market tops when there is strong discussion related to increase or reduction price.
A higher volume transaction is a common at the beginning of a new trend. Before a market falls down, there are volume increase transaction caused by a market panic driven selling. Level of volume transaction can give us a sign of a healthy uptrend or downtrend. A healthy uptrend should have a higher volume in the next upcoming price and a lower volume on the next reduction price.
Volume is an important points and monitored by the technician and chartist to determine upcoming trend reversal. If the volume goes down during uptrend it is a sign that trend will come to an end. When determining a new trend using chart, it has two sign to buy and to sell. Sell sign appear when price is down with a high volume of transaction. A market stock will eventually decrease/went down until end of January, there is a sign to buy at that time because of a price goes up followed by a high volume and then the price will climb up until the next month.
Accumulation & Distribution
The meaning of accumulation is when a market situation controlled by buyers. It is marked by a downtrend while the volume keeps going up. It seems that stockholders is loosing their control to their buyer, and sellers need to pay attention to this because it can make a reversal condition.
A meaning of distribution is when a market control by stockholder. An uptrend which may appear while the volume keeps going up is a sign that distribution is about to happen. It seems like a brokerage loosing their control and the situation will going to reverse. It may occur when a volume increase (compare to the previous session) and decrease of closing price or there is no movement after an uptrend.
During a downtrend, low volume is not too important, buyers commitment is more important to increase the value of a stock. When a market loose their interest to buy, the price will go back to decrease.