In today’s chat, I have been discussing the use of relative volume to confirm fast momentum move reversals. The dashed line represents volume on the SPY adjusted for the daily “smile” effect where am and pm volume are higher than mid-day volume such that we can see how unusual volume is on a normalized basis. Fast intraday moves will often wiggle around trend, and its easy to get itchy trigger fingers and take profits too soon. Note how the cessation of volume in the first example confirms the end of trend (volume in orange, price in blue). Likewise, in the second case, the trade remains open because volume is still rising even as price shows potential early stabilization.
