Stock Volume and Distribution
The best way to analyze the bearish stock volume is with the upthrust signal. The news is most bullish at market tops but if stock price reluctant to rise after a series of good news, the party may be over. It may be time to run for cover and put your profits in the bank. For the stock you monitor, look at the share price pattern as well as the stock volume.
You should be tightening your protective stop to close to the market action. You should be aggressive with these stops. Let the stock market itself take you out but don’t give back much of your accumulated profits.
These 3 patterns taken in isolation are symptoms of distribution. They are powerful symptoms because they represent price action is always the final judge of profit. To further confirm trend turn, the up-thrust bar tells the trend is losing momentum. On each downswing, expect to see high volume and on each retracement lower volume.
You must be disciplined to get out at your stop point. Don’t hang on and hope that stock price will return to the old high. Hope is an emotion. Those who trade with emotion will be destroyed. Never let your emotions get involved.
One of the most useful tools of the bear is the wide range price bar. 3 things to look at, at least double the average range, high volume on the day of the wide range bar, the bar occurring at a fortuitous place such as an 18 day line change.