Technical analysis of volume by Howard K. Waxenberg
You don't need a computer for volume studies; the analysis presented here can be done with a calculator and The Wall Street Journal. This article provides an outline of technical tools derived from volume figures which can then be used for analysis to gauge the internal strength or weakness of a market.
In my last article I wrote about the technical analysis of the equity markets that could be accomplished
without the aid of a computer or on-line database. In that article I showed an analysis of advance-decline
data. This article will continue along a similar theme, but I discuss volume and the technical analysis that
can be accomplished using technical tools developed from volume figures.
Volume analysis is one of the most important tools of technical analysis since volume can give an
excellent view of the internal structure of a market, a structure that is often hidden by external price
action. An analysis of volume can give us a true measure of the amount of buying and selling that is
taking place and the energy behind each of these market forces. Also, the old market maxim still holds
true, "Volume precedes price." This is more true today, and somewhat more self-fulfilling, as more and
more advisory services make their recommendations based on the internal volume readings for a market