Reading volume events
Spikes, droughts, climaxes — the volume signatures worth acting on.
Volume spikes: someone big acted
A candle with several times normal volume marks an event — news, a large player filling, stops sweeping. The information is in the pairing with price: huge volume with a wide directional close is initiative — someone forced the market and won. Huge volume with a small body is absorption — aggressive orders met an equal wall and went nowhere. Absorption at highs is quiet distribution; at lows, quiet accumulation.
Climax volume
The single heaviest volume of an extended move often prints at its end — the climax: panic sellers capitulating into a low, or the last FOMO buyers piling into a top. The crowd's maximum participation is the market's minimum remaining fuel. A climax bar followed by failure to continue is the classic terminal signature of a move.
Volume droughts
- Dry volume on a pullback is constructive — no one is pressing the counter-move; the trend's owners are holding.
- Dry volume on an attempted breakout is a warning — a level cannot truly break without participation, and thin breaks are the ones that get swept back.
- Dry volume everywhere is midday tape — the session talking, not the stock. Interpret nothing; wait for participants to return.