I think that analysis of volume for individual equities is much more important than the widely reported trading volume for the indicies. For equities I first look at volume as a measurement of liquidity to determine whether or not I want to get involved in the stock, anything less than 500K shares/day is typically where I cut-off my search for trade ideas.

Once I have found a stock of interest I like to see the general pattern of volume expanding in the direction of the primary trend followed by lighter volume as the stock experiences a corrective move in that trend. To me the volume represents the level of emotions (enthusiasm or disdain) the participants have for the stock. Increasing volume in a rally shows motivated buyers, while the lower volume corrective move indicates that there is a higher likelihood that the selling is simple profit taking and typically not the beginning of a reversal lower, the opposite would be true for a stock in a downtrend. I should point out that volume is a secondary measurement to price action but it is does provide us with a good insight into the collective psychology of the participants.

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