Bullish volume increasing volume on up-moves and decreasing volume on down-moves Bearish volume decreasing volume on up-movies and

nd increasing volume on down-moves Demand buying interest Supply selling interest Accumulation when professional traders buy as many orders as they can without adversely moving the price up, until the supply at the price level they were buying at is almost gone. This usually happens after a bear move. Once the supply has been removed, the resistance to higher prices is gone (because the pros bought whatever was available, so theres nothing/not much left at the price level to buy, so the price cant go back up to reduce the pro traders profits). If its happening in other instruments or other markets at the same time, a bull market may be beginning. Distribution at potential top of a bull market, pros will look to sell the stock they accumulated before, without trying to push the price down against their own selling. Sometimes, if the selling is so great that price is forced down, the selling will stop and the price will be supported, which gives pros and marketmakers the chance to sell more stock on the next wave up. Once the pros have closed their positions, a bear market starts because markets tend to fall without professional support. When markets transition from one major trending state to another Buying Climax an imbalance of supply and demand that turns a bull market into a bear market. If the volume is high with narrow spreads into new high ground, then there is a buying climax. It is called a buying climax because there has to be a huge demand for buying from others. Pros and marketmakers dump their holdings into this buying frenzy, so much so that higher prices are impossible. In the last phase of the buying climax, the market will close in the middle or high of the bar. Selling Climax when an imbalance in supply/demand that turns a bear market into a bull market. Volume will be very high on down-moves and will have narrow spreads with the price entering new lows. Just before the market begins to turn, the price will close in the middle or low of the bar. To create this phenomenon, a huge amount of selling has to happen. Sometimes you will see the market gap up on weakness. This price action is designed to try and bait traders into buying in a weak market and creating a poor trade, or hitting stop losses for sell orders, etc. These gap-ups generally happen into the regions of new highs, when news is good and people think the market is only going to go up. These gap-ups can happen in strong markets too, but usually after a sideways trading range. The purpose of this gap-up/mark-up is to encourage traders trapped in the sideways market not to sell, so prices can be pushed through potential resistances as fast as possible. Generally, wide spread up bars are designed to lock you out of the market rather than baiting you in.

Identifying buying and selling For a market to move up you need buying, which is seen on an up-bar (a bar that closes higher than the previous bar). The volume should be increasing but not excessive, which would indicate supply in the background that is swamping demand. If you see low volume as the market goes up, it has to be a fake move (or not rise very far) because the low volume is caused by pros not participating in the up-move. Sometimes in a bear market, there are weak up-moves on low volume. This only happens because the pros are not interested in higher prices and want the bear market to continue. The opposite is also true for down-moves. For a down-move to be legit there should be evidence of selling, which will manifest itself as increased (but not excessive) volume on down-bars. Be wary of excessive volume because it indicates demand in the background. If you begin to notice volume reducing on down-bars, it is evidence of selling pressure being reduced. The market may keep fall, but it could also rise due to lack of supply. A decreasing amount of volume on down-bars indicates lack of professional interest to the downside. Lack of demand A low volume up-bar with narrow spread. If price closes down on declining volume over the next few bars + narrow spreads, it indicates lack of selling pressuremeaning the weakness was only temporary. Signals should not be viewed in isolation always look at the background (what are the previous bars doing?), and definitely wait for confirmation before blindly following a signal. Testing supply Supply coming into the market is dangerous to any pro that is bullish, because they have to absorb any selling if they want the high prices to be maintained. The danger to the pro is that he may be forced to buy at very high levels and will lose money if the market falls. Rallies are usually short-lived after you see supply in the background. Pros know that given enough time (with bad news, down-moves, etc.) the floating supply can be removed from the market, but he has to be sure before trying to accumulate. The best way to do this is to rapidly mark prices down, which will challenge any bears to come out into the open and expose themselves. The amount of volume will tell the pro how much selling there is Low volume means that there is little selling on the mark-down. High volume shows that there is selling (supply) on the mark-down. This process is known as testing. This process catches stop and shakes out the market as well, making the way for higher prices. It is a good sign of strength (as long as theres strength in the background). A successful test on low volume means that the market is ready to rise immediately, while a higher volume test results in a temporary up-move and will be subject to a re-test of the same price area again at a later time.

Any down-move dipping into an area of previous selling which then closes on or near the high of the bar, on volume is a strong signal for strength (because the bears pushed the prices back up). If the market is bearish, you may see a test. But of the market does not respond to what is normally seen as strength, then it shows further weakness. Any testing that does not respond immediately with higher prices within the next day or so, is a sign of weakness. This is because pros never go against the market. If they think the market is still weak, they will withdraw from trading. If it were a true sign of strength, the market-makers would have stepped in to start buying. Pushing Up Through Supply Old trading ranges form resistance areas, because they are known supply levels. Traders who bought into the market in the trading range are locked in by a down-move and waiting to close out their positions. If pros want higher prices, they will have to absorb any selling from these traders. One way to minimize selling is to create a fast, wide-spread or gapping up-bar through an old trading range as fast as possible. The pro does not want to buy at high prices, he has already bought his shares at lower levels. He wants to discourage the locked-in traders from selling, which would hinder how far up the prices go. As the market approaches the area at which locked-traders could sell with a loss, the price rockets up on wide-spread. The locked-in traders will suddenly be showing a profit and tempted to not sell because they are in profit. If there is high volume accompanying wide spreads up, it means the pros were prepared to absorb any selling from locked-in tradersthis is called absorption volume. This means pros anticipate higher prices and are bullish. They know that a breakout above an old trading range will spur new buying, and additionally, those traders who shorted will be forced to buy to cover their poor positions before. If you see any testing or down-bars on low volume after this event, it is a very strong buy signal. High Volume on Market Tops A high volume up-day into new high ground with the next day being level or down is an indication of weakness, because of the high volume had shown professional buying, how could the volume not continue to go up? This action shows that buying has come into the market, but most likely from weak holders who were sucked into a rally top. Effort versus Results Effort to rise is seen as a wide-spread up-bar, closing on the highs, with increasing volume. Conversely, a wide-spread down-bar, closing on the lows on increased volume is bearish, and represents effort to fall. If the effort to rise failed, then the high volume seen must have contained more selling than buying. Supply on the opposite side of the market has been swamped by demand from new buyers and slowed or stopped the move, which has now turned into a sign of weakness.

The Path of Least Resistance If selling has decreased on any down-move, the market will then want to go up (no selling pressure). If buying has decreased on any up-move, the market will want to fall. It takes an increase of buying, on up-bars, to force the market up. It takes an increase of selling, on down-bars, to force the market down. No selling pressure (no supply) indicates that there is not an increase in selling on any down-move. No buying (no demand) shows that there is little buying on any up-move. Bull markets run longer than bear markets because traders like to take profits. You cannot have a bear market from a bull market until the stock bought on the lows has been sold (distributed). Resistance in a bull move = selling. Pros do not like having to keep buying into resistance, and they also want to take the path of least resistance. To create the path of least resistance, they may have gap-ups, shakeouts, tests, or do nothing at all. Bear markets run faster than bull markets because a bear market has no support from major players. Recognizing Market Tops After substantial rises in the market with prices going into new high ground (i.e, there is nothing higher on the left), high volume appearing on a narrow spread on an up-bar is a strong sign of weakness. If the high volume was buying, then the spread would have been wide and closing up. How to Recognize the End of a Rally? When bullish, there are 5 major signs of supply (selling) to worry about: Buying Climax o Very wide spread up-bar that closes on very high volume. Usually after a bull market has taken place. If this is in new high ground, this is almost certainly a market top. Failed test (a test that is not accompanied by low volume) o Look for this after a buying climax. A test with low volume indicates higher prices, but the same test with high volume indicates supplythe market probably wont go up very far with selling in the background Narrow spreads & high volume on an up-bar when the market is in new high ground o Seeing fresh new highs, the public rushes into the market to buy, but the pros have decided to sell to them. This is usually seen after a rally of some sort. Up-thrusts o Wide spread up-bar that closes on the low. Usually seen after a rise in the market. Usually seen after selling, just before a down-move. The volume can be either low (no demand) or high (supply overcoming demand). Usually seen after some weakness. Rarely seen in strong bull markets.

Sudden high volume on an up-bar, with the next bar being a down-bar on a wide-spread, closing below the low of the previous bar

Professional Support (Reverse Up-Thrust) Selling climax is a wide spread down bar, with very high volume, that closes on or near the high. A reverse up-thrust is a mini selling climax. Any down-bars on low volume (no selling), especially if they close on the high, are a sign of market strength. What Stops Down-Moves and How to Recognize When It Happens? High volume on a down-bar always means selling. But if the bar closes in the middle or high, then it indicates pros attempting to buy into the selling or absorbing the selling, causing the market to stop going down. Pros will only buy into the selling down-bar if the price levels have become attractive to them and other pros have started to accumulate. This is called absorption volume, and usually marks the end of a downtrend. It is characterized by a very high volume bar that closes below the previous bar, on wide spread, near the high. Recognizing Market Bottoms Seeing high volume on a down-bar in a downtrend shows high activity. If a rally starts because of market-makers buying (or absorbing) the selling from weak holders, the market will usually re-test this high volume absorption area, bring the market back down to where the high volume was first seen, to make sure that selling has disappeared. You will know if selling has disappeared if the volume penetrating the old high volume price area will be low. Shake-out Often seen at the end of a bear move. Is a sudden wide-spread down-bar, engineered to create panic selling to transfer stock back to the pros. Looks very similar to a selling climax, except a selling climax has a bear market in the background. Stopping Volume During a bear move, prices may resist further down-moves. SV is seen intra-day, during a down-bar, on high volume, closing near the highs. Buying must have entered the market for it to close on the high, as indicated by the high volume. This action changes the direction of the movie, or causes price to go sideways, showing that the pros have stepped in and started to absorb the selling from weak holders. They are accumulating and trying to encourage other traders to sell. Falling Pressure Shows that there are few sellers detected as the market goes down, shown by wide-spread down-bar on low volume, closing the low. It shows that the market is unlikely to decline much furtheris the pros were still bearish, there would be an increase in selling on the down-side, not a decrease.