Volume is one of the ultimate indicators. Volume can be associated with the amount of emotion that goes into a direction that the stock takes. If a stock has high volume on either a positive or negative move, chances are that direction will continue because investors have strong emotion towards that particular direction. However, if a stock makes a move in either direction will low volume we would believe that movement in that direction is only temporary and viewed upon as a weak move.

In this graph we notice that when the stock started to top off and begin to pull back, the volume stayed relatively low. This means that the dip was weak and would not last long. If the pullback volume is low this means that many previous buyers are holding their positions. On the other hand, if the pullback in volume is high, buyers are selling just as fast as they bought in. When in a position long and you notice selling on high volume, it might be wise to take profits and get out. There are always better stocks out there to choose from.

For you swing and position traders, look at the volume spikes and locate a stock going through an increase in volume while the stock continues to trade in the same, tight range. This indicates a string possibility that institutional buyers are quietly accumulating the stock and hoping that no one will notice.