Overview The analysis of volume is basic and essential in technical analysis. Volume provides evidence of intensity with a given price move. As volume often leads price, it is a valuable indicator, especially for price peaks. Interpretation Monitoring the volume will either corroborate a price movement or caution that a price move is unreliable. Many believe that volume precedes price.
Volume confirms the price trend when it increases with an uptrend and decreases with downtrends.
When you have a price breakout on declining volumes, this divergence is a warning of decreasing buying pressure. High volumes are common at the beginning of new trends such as a breakout and are typical of market peaks when there is strong agreement that prices will move higher. Volume also often increases due to panic, just before market bottoms. Low volumes are typical of the uncertain outlook that usually occurs in sideways channels. Low volume also often occurs during the indecisive period during market bottoms.