Low Volume Breakout/down

L

Lightningsmurf

Convensional wisdom suggests that a breakout (Bollinger Band or price channel) should be accompanied by higher-than-average volume. I'm wondering whether this is true? Recently I've noticed several instances where breakouts accompanied by lower volume seem to do better. It's as though the stock is suggesting that it can perform well despite lack-luster participation.

Since yesterday (2/11) was rather enthusiastic, this might not be the best example. However, looking at a chart of HNZ, the close (2/11) is above somewhat constricted Bollinger bands and the volume is poor at best. I won't be taking a position in HNZ, but it will be interesting to see how it performs in this situation.

Any thoughts?
 
Quote from Lightningsmurf:

Convensional wisdom suggests that a breakout (Bollinger Band or price channel) should be accompanied by higher-than-average volume. I'm wondering whether this is true?

[...]

Any thoughts?
More...

Hi Lightningsmurf,

I just came accross one of metoox's nuggets. This may also be applicable here:

"Works fine the majority of the time; when you are wrong, you are really wrong ..."

Be good,

nononsense
 
Depends on what phase the move is in. During an accumulation period where the public isn't on the stock (no reason to attract public attention), then a stable/low volume break is just a way for firms to keep the stock moving higher without creating the euphoric public phase.

Eventually the rise in a stock will attract attention, more volume piles in, price rises faster and exhaustion hits.

However, if a break on low volume occurs post-euphoric type action, then I'd be less inclined to go at the breakout as the exhaustion has failed to attract new buyers and chances for an ugly air pocket are higher.

Check out the chart for a better visual of what I mean.

P.S. I didn't use Time/Sales or Level 2 for this example of Tape Reading.
 

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Well, 3 bars have passed since my original post and HNZ has made higher highs on 2 of those bars (with successively lower volume). Yes, a strong market certainly helped, but it makes me wonder whether low volume breakouts should be given more press.

Any thoughts?
 
Quote from Lightningsmurf:

Broccoli is the only vegetable that is also a flower.

Any thoughts?
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Hi Lightningsmurf,

Thank you for your enlightening sequels you insert at the end of your postings.

May I ask, what about cauliflower?

:cool:

nononsense
 
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