The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Market Phase Analysis

volume tends to decline to relatively low levels just prior to a phase transition.

Hence, we may use volume as a timing indicator for forecasting potential phase

transitions.

Should an uptrend or downtrend be inherently weak, then this is normally

indicated by a fall‐off in volume during the trend phase. This is a sign of trend

exhaustion and it signals a potentially earlier onset of a distribution or accumula-

tion phase. See Figure 4.16.

Besides phase related volume action, open interest may also reveal potential

phase behavior. For the most part, open interest action tends to correlate fairly

figure 4.15 Phase Related Volume Action.

figure 4.16 Trend Exhaustion as Indicated by Volume Action.