In a bear market, there are stocks that still rise. However, in a bear market, there are times when even the good stocks are pulled down and you find declining prices on average or falling volume. Falling or average volume when prices are falling is usually a sign of strength, not weakness; especially if the stock has generally been in an uptrend prior to the short term down trend.

When a stock exhibits steady volume when prices are steady, then this doesn’t really give us anything to go on. It doesn’t give us any insight into where prices will necessarily go based on a volume read, but the fact that the price range is narrowing suggests that something will occur soon enough. It is then that we will get both a volume and a price read to determine the sustainability of the next move.

There is a close relationship between price and volume. Although indicators have been built on various volume measures, all indicators have a couple of inherent problems and we continue to feel that it is important to view price and volume as a relationship that says different things about a stock when the general trend is up versus down, versus sideways. In general, rising prices should be accompanied by rising volume for the market and/or stock to be healthy.

Similarly, falling prices should be punctuated with volume spikes and to a lesser degree, rising or steady volume shows a healthy continuation to the downside. Falling volume that is associated with rising prices generally is a red flag warning you to be careful as a healthy correction could be just around the bend.

Average volume on rising prices generally occurs when a stock is turning from down to up or sideways to up or sideways to down. Generally a stock that moves from up to down has large prices drops that is accompanied by large spikes in volume.

If you intend to trade stock, you should only ignore volume at your own peril. It can give you the comfort to stay with a position when times are tough, or to signal that you need to lighten up or get out of a position when things seem fine. Volume recognition is your friend just as is the trend.

Article Written by wallman Hot Penny Stocks