#3 – Trading Tip of the Week

Volume used as a way to confirm a price pattern — In the Head and Shoulders pattern, for example, it is important that volume is light during the formation of the left shoulder and even lighter during the formation of the head. Volume should then be heavier on the subsequent down move from the right shoulder through the neckline. Another example is that on Double and Triple Top patterns, it is important that there is lighter volume on the successive peaks with heavier volume on the downward moves. Triangle patterns are usually formed on lighter volume with heavier volume on the breakout from the pattern. In general, it is important to look for heavier volume on a breakout from chart patterns, trendlines and congestion.