Last week Silverado stock recorded several days of high volume of shares traded with a record 40 million shares traded one day, the first thing that came to my mind was "VOLUME PROCEDES PRICE". Thought it this would be a good time to pass along some more basics about chart reading to the Agora board. Lets see what this week brings. GRIM

Volume and Price

So if all volume represents is interest in a stock, when is it useful? The only time volume is useful is when you combine it with price. For example:

Expansion of range and high volume - If a stock is drifting along sideways in a narrow range and all of sudden it breaks to the upside with an increase in range and volume, then we can conclude that there is increased interest in the stock and it will probably continue higher.

Narrow range and high volume - If a stock has very high volume for today but the range is narrow then this is called churning. In this case, significant accumulation or distribution is taking place.

Ever heard the saying, "volume precedes price"?

Many times you will see volume pick up right before a significant move in a stock. You can see that interest is building. On a stock chart, look for volume to be higher than the previous day. This is a sign that there may be a significant move to come.

Take a look at this example...

This stock rallied for three days in a row on relatively low volume. Then, on the fourth day, volume increased dramatically. This increase in volume began the move to the downside.

Interpreting volume on a stock chart can be confusing! Just remember that the price action is the most important factor on a chart.

All else is secondary.