Friday, May 15, 2009

05.15.09 - Relative Volume Peaks

Today's early move to yesterday's highs immediately broke down consistent with the short-term trend all the way back to the pre-opening lows. Note how the downward sloping intra-day five-day moving averages proved strong resistance, and could not be breached.

One indicator I like to follow is what I call 'Relative Volume', comparing current bar volume to the multi-day average for those same bars to remove the 'smile' effect where absolute volume is higher at the start and finish of the trading day. When relative volume peaks far above average levels, trends often pause -or- reverse as key value levels are reached, confirming the cessation of the excess supply or demand. Today, for instance, you can see two clear peaks at the AM session price highs and lows. Absolute volume is relatively higher today, making it easier to play trends.

These mid-day lows held yesterday and Wednesday so it's clearly an important level, though just now internals appear to suggest they may break this go around. For potential support levels below, see yesterday's post.

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