Both phenomena represent influential events that will extend their influence through the underlying trend for months to come. Measure Power Spikes through their relationship to intermediate moving averages of volume. Alternatively, significant crowd activity may stretch across a series of trading days. Although each histogram does not qualify as a true PS event, the end result is the same. To verify these trend hotspots, daily volume must equal or exceed 2 times the 50-day VMA two days in a row.
Prediction following identification depends on the placement of price within the underlying trend.
Rather than toss a coin, combine volume study with pattern analysis and technical indicators to determine which outcome is likely. This process of cross-verification eliminates bias and always improves the bottom line. Spikes that follow an extended uptrend or downtrend generally flag a significant reversal. These find confirmation through relative strength indicators that have extended well into overbought or oversold territory. A PS event accompanied by price surging through significant support or resistance provides verification of a breakout or breakdown.