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Let’s look at volume with technical support, technical traders observe the volume around key levels of support and resistance. These levels may be long-term price interest points over a long time period, or technical support levels such as an indicator like a Fibonacci retracement. These levels can often cause a congestion of trading, what this is known as guys is price consolidation, an increase in volume is often seen as the early sign of a trend. As prices push away strongly and from consolidation and find price direction. Let’s look at this in some detail, I just wanna discuss it very briefly. Just above here we have a technically well confirmed level of technical support and resistance. We see price consolidating just above the level, so above what we see here is the market trading down on various occasions.
I’ll just use my pen to highlight, obviously we can see with the black (s) for support. The market actually trades down past the level, and actually continues to trade up again. Another’s indicative, each one of these and time periods here, we see the market trade down, trade up and close above the level. Here it’s very volatile within this price section, again but not convinced of it either way, and again one two three with these candle sticks.
It’s rejecting the downside, this is a very very informative level of price resistance, and where traders do try and force the price below this level. But it does not want the close below the level and effectively above our price level. Technical support is very strong indeed. well what does that mean? When price is actually trades below the level, and close below low level, well it’s very significant! So the candlestick itself is very significant, because in this example we have a bearish very strong sign, that the market is continuing to trade down. What we see is if I just use my epic pen here again, I’ll use a different color to depict what we actually see, is the market closing below the level here, and continuing to trade, why is this significant in terms of using volume as a technical support? Well evidently we see volume rising above these levels here, volume rising above nominal levels, and again here. We get a close where volume is actually very very handy, that I do believe it’s our highest level of trading volume for the given range. So very technically significant indeed, and as prices close and continue to trade below the level, volume is still quite high so that that gives us a sign as we go back to our fundamental discussion.
The level of interest or participation at the level of agreement, between traders, seems to confirm we’ve closed below the level. Were not rich racing, we’re happy below the level and prices may shift. So eventually the trading congestion layer leads to a break out, and creates new price direction. This is also supported by an increase in volume through the downside, as we can see in the chart let’s have a look at the cocoa market here. So we have our two levels of long-term price support, here two technical support levels both a ceiling above here at 2171 on the floor technical support at 1798. As you can see there is a long-term level of price congestion, between actually trading these candlesticks we can see the price does break down. But we see as long as the exact price congestion has no real structure until we get to these levels. Here can we decide, well this is the second time we’ve actually been towards these price levels here 2171, how is price going to react? How is volume going to react? What story does that tell us in terms of price action, on future trading momentum? well let’s have a look in a little detail, here we see at Point A, we see the market break up and what significance is that in terms of volume? Well we have low volume, it actually causes a false breakout and trades to the downside. They’re just below, we can see volume actually decreases as the market breaks up through the ups, then we see the market continue to trade with an increased low level of volume, until we actually move forward. As the market trades we see very very low average volume, with a breakup to the upside evidently as the mark comes back to our long term, and price point just here below we see breaking up to new prices. Another supported again and actually by an increase in volume, resulting in a breakout to the upside. We can see a very low level of volume, and then as we shift towards our long-term price resistance level, volume pushes us through that level and actually closes above it. now we’re aware to the upside, so very significant in this chart using volume to indicate a breakthrough through technical support.