What to look for? increased volumes on those rare up days.

Volume indicators are often viewed as simple but in my opinion can be very deceptive. Volume can come in many forms: Could be a slow, subtle increases over time or there could be a burst of increased volume out of the blue with or without news. Could be just another ho-hum day at the market and the volume will spike. Price may or may not appreciate either and investors will wonder what the heck is up with this picture....volume with no sp increase.

Volume is the driving force for the sp whether positive of negative. For an uptrend to continue bullish, the up-day volume must be greater or out weigh that of the down-day volume. Increased upday volumes are calculated through the On Balance Volume indicator as positive (OBV uptrend). Conversly increased down-day volumes are calculated as negative (OBV downtrend).

Look for divergence/convergence between the SP and OBV indicator.

Divergence (positive): SP falling (or channeling sideways) and OBV rising, this is a positive divergence which is good. (this is considered the most powerful depending on relative average daily volume/OS ratio. Smart or new money coming in. Hence, the old saying ‘Volume precedes price’.

Divergence (negative): SP rising as OBV falling. (investors are lured into false sense of security when the sp is uptrending. Be wary of this condition).

Convergence (positive): OBV tracks the SP in an uptrend.

Convergence (negative): OBV falling, SP falling. (this will be obviously bad)

Today, PTSC experienced light volume on a down day and ended down .004 which is exactly what is needed on down days to maintain a positive OBV. The OBV dipped slightly but remains overall in a slight uptrend. Let's say for example, the sp finished the day the same as it did today (.004 down) but the volume was heavy (say double today's vol). This scenario would have had a very negative effect on the OBV and most likely triggered a break in the short term OBV uptrend. At first glance this .004 drop in sp may not seem too detrimental to the prevailing short term uptrend and investors would in all likelihood equate this drop as normal because the sp is due for a small pullback.

gcduck had a profound statement in his post: "that more volume was always caused by sellers (Swartz and in the beginning of 2006 those shareholders, who took their profits), who threw tons of shares in the market.". Hence, high volume on down days. Those down days may not have been all that bad either (say only a couple of cents or so) but the positive counter effect of low volume on those rare updays was not enough to sustain any real uptrend.

Hopefully this explanation about volume will be helpful. I’m currently working on volume data/OS share vs average daily volume. I will share when complete and/or find any significant data.

GLTA,

Regards,

PxP