A profitable pattern of trading volume

Above average trading volume following a sharp advance is a strong signal a particular stock is close to a top. Every peak in SH (in July 2008, October 2008, November 2008, and March 2009) has been accompanied by unusually strong volume (click on chart to enlarge). This is the time when the crowd jumps in and the pros sell.

Note that volume dries up after a peak. The weak hands are left holding the bag. The pros, on the other hand, wait for the market to decline and volume to dry up before buying again.

The decline in volume reflects the indifference, indecision, and apathy of investors. Volume declines as the stock heads south. Eventually the pros find value again and start buying. And volume picks up again. This is exactly what happened in August 2008, November 2008, and December 2008.

This pattern suggests that the time to start buying is when volume stabilizes after declining from above average levels.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/. You can review The Peter Dag Portfolio, free of charge of course. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Since 1977