Market Phase Analysis
decreases as the accumulation progresses, signaling a potentially imminent break-
out, be it to the upside or downside.
Besides volume action acting as a timing indicator for potential breakouts, high-
er than normal volume at the initial stages of an accumulation or distribution is a
strong indication that a bottom or top in the market has been formed. Figure 4.19
is an hourly chart of Facebook Inc. Notice how relatively large price‐based vol-
ume, as opposed to the traditional interval or time‐based volume, coincides with
the distribution and accumulation zones, with the market testing the consolidation
boundaries for additional liquidity. Hence, price levels associated with historically
high volumes of activity represent potential levels of accumulation or distribution.4.4 Moving Average Interpretation of Market Phase
Market phase can also be potentially identified by the behavior of moving aver-
ages at each stage of the three phases. Figure 4.20 displays a simple moving aver-
age as it encounters the trend and consolidation phases.figure 4.19 Price-Based Volume Action on the Hourly Facebook Inc Chart.
Courtesy of Stockcharts.comfigure 4.20 Moving Average Action during the Trend and Consolidation Phases.