Tyler Craig: Volume follows price action in the hierarchy of charting. If price action is king, then consider volume the prince. There are a variety of methods used to seek clues hidden in volume patterns. Some use it as a traffic light flashing green for confirmation and red for non-confirmation. In addition to helping signal the strength of a trend it can also be used as a contrarian signal.
It’s always interesting to see a high volume trading session after a stock has risen multiple days. Oftentimes high volume after a multi-day directional move is a sign of exhaustion – the final gasp of the surge. Such has been the case time and time again over the past two months in the iShares Silver ETF (NYSE:SLV). The following chart highlights the last four short term highs in SLV are all marked with high volume trading sessions.
While we can comfortably state SLV has formed yet another short term top it is entirely too early to determine if the uptrend is dead. Remember, the silver bull has left many top pickers maimed and wounded in the wake of its relentless run. More evidence is needed before drawing any major bearish conclusions. Rather than a high volume trading session like yesterday making me an aggressive bear, it would simply turn me from an aggressive bull to a more cautious one. This dip may serve to be yet one more buying opportunity. But c’mon SLV was up over 20% in eight trading sessions. Getting a little more defensive after that type of move is never a bad idea.
ABOUT: Tyler Craig, author of Tyler’s Trading and owner of TC Trading, Inc. Over the years I’ve educated hundreds of traders through my work with one of the nation’s leading educational firms. I enjoy writing and am a current monthly contributor to the Wealth Intelligence Magazine. My writings have also been featured in Expiring Monthly and frequently show up in the Abnormal Returns Options Newsletter. In 2009 I started Tyler’s Trading to share daily market commentary on stocks and options.
It’s always interesting to see a high volume trading session after a stock has risen multiple days. Oftentimes high volume after a multi-day directional move is a sign of exhaustion – the final gasp of the surge. Such has been the case time and time again over the past two months in the iShares Silver ETF (NYSE:SLV). The following chart highlights the last four short term highs in SLV are all marked with high volume trading sessions.
While we can comfortably state SLV has formed yet another short term top it is entirely too early to determine if the uptrend is dead. Remember, the silver bull has left many top pickers maimed and wounded in the wake of its relentless run. More evidence is needed before drawing any major bearish conclusions. Rather than a high volume trading session like yesterday making me an aggressive bear, it would simply turn me from an aggressive bull to a more cautious one. This dip may serve to be yet one more buying opportunity. But c’mon SLV was up over 20% in eight trading sessions. Getting a little more defensive after that type of move is never a bad idea.
