THE HAnDbook oF TECHnICAl AnAlysIsclosely to volume action. It is when they disagree or diverge significantly that ad-
ditional evidence is obtained about potential future market action. If open interest
increases during a consolidation instead of decreasing, the breakout move and
subsequent trend tends to be much more rapid and extended. See Figure 4.17.
Figure 4.18 is an intraday chart of Isis Pharmaceuticals Inc. We see the extend-
ed distribution phase being violated by a downside gap in prices, accompanied
by high volume. The trend phase than ensues with bullish volume divergence and
subsequently transits into an accumulation phase. Note how volume gradually
figure 4.17 Potentially Strong Reversal as Indicated by Open Interest Action.
figure 4.18 Volume Action During the Trend and Accumulation Phases on the Intra-
day Isis Pharmaceuticals Inc Chart.
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