THE HAndbook oF TEcHnIcAl AnAlySISfIgure 6.6 Bullish Volume on the Daily Chart of SPDR Gold Trust Shares.
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In Figure 6.6, we observe bullish volume in periods 1 to 10, except in period 5,
where the volume action was somewhat flat. Periods 1, 3, 7, and 9 display bullish
confirmation, while periods 4 and 6 display bullish divergence. Periods 2, 8, and
10 display volume declining during a consolidation. In a consolidation, volume
functions as a breakout timing indicator. We observe that at the end of periods
2, 8, and 10, price experiences either an upside or downside breakout whenever
volume declines to its minimum for each period.
Summarizing all possible divergent and convergent scenarios:
■ (^) Whenever volume and price are declining together, we have bullish divergence.
■ (^) Whenever volume and price are rising together, we have bullish confirmation
(or convergence).
■ (^) Whenever volume is declining and price rising, we have bearish divergence.
■ (^) Whenever volume is rising and price declining, we have bearish confirmation
(or convergence).
reading Divergence for Volume bars, smoothed
Volume, Volume Oscillators, and Open Interest
As far as divergence is concerned, we can classify volume oscillators into two main
groups, namely:
- Non-price‐based volume oscillators
- Price‐based volume oscillators