Monday, December 1, 2008
Selling on Light Volume
It has been selling all day right out of the gates without too much dip buying. However, volume has been extremely light on the S&P and it looks like the bulls are trying to hold the 840 level. I don't want to push shorts too much and have taken some quick gains on portions of my shares and just letting the rest run while raising my stops. I am probably going to just wait for the close before I make an more material moves. I am interested to see if the volatile final hour will show its face again or has the market began to calm and show some kind of rationality.
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2 comments:
Jax, a question about volume, i'm just learning the intricacies of volume so i apologize for my ignorance up front... if today sold off 680points on light volume, is that a clue to tomorrow in that if the selling pressure was light, that it might or probably will be heavier tomorrow and another possible big or bigger down day might follow? i geuss i'm trying to "get" why light volume is significant vs heavy volume in this situation, ie. after a rally etc, any good books or training dvd's that i can use to get a full idea about volume specifcally?
HSS,
I posted that mid-day when the S&P was still holding the 840 level and volume was light. Volume picked up considerably in the final two hours and the support level was taken out. Now there really isn't any support until about 800.
Basically the idea behind volume in this case is after such a big move across the averages, many traders are sitting on gains. If there is substantial weakness in pricing you would expect the volume to pick up as those traders fear losing their gains...unless the majority of traders think the stock is still greatly undervalued. Basically I think most traders were waiting to see if that 840 level held and once it didn't they moved to lock in their gains.
Basically big volume indicates a lot of traders think the stock is over valued or under valued at that price level. I am sure you could get some good info on investopedia.com
A good book is Shark Investing by James DePorre.
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