Sunday, September 12, 2010

Volumes : Is it important?

There was a slight disagreement with an 'old uncle' with the trainer during today's CN meeting. The question arises when the trainer claimed that he does not look much into volume but he places candle-sticks formation as his primary pointers when he trades. This 'old uncle' who has complained about the meeting NOT starting on time showing his dis-pleasure but voicing out a few of his own views.

I think there is a no such thing as right or wrong. The main point should be different strategy using different time frame for different stock!! For shorter term traders or contra, volume is primary. U need to SELL(after you bought into it, ok?) and u need buyer to buy from u,right? So, volume is important for punters, short-term contra-players.

But what the trainer might mean is(pardon him, he looks very young - so those 'old uncles' certainly think they know better about market than him!) ... IF a candle-stick showing some bullish reversal candle-sticks, it gives us reason to monitor it even tho the volumes might be thin. I didnt hear much(my earphone was on listening to music, actually) but I think both were right(or wrong) about their points.

What do I think about volumes? A lot. To me, volume is like a fuel ... for a stock to move, there must be some trading activities. It can be UP or DOWN, of coz. For example, recently we do see HIGH volumes in some tech stocks when they were diving lower. SELLING pressure was great and many selling their holding. The significant increased in volumes as the stock dives giving us what investors think of it(it stinks - throw, throw, SELL). If the stock did not rebound after the sharp dive(with huge volumes) but drifting lower with low volumes, it shows the selling pressure subsides for the time being and investors are still digesting the bad news.

But there are times, those low volumes could be consider as positive. Accumulation of some stocks by some players done before a huge spike(manipulators pushing the price up, and start to distribute them then). Volumes normally are low at this level ... so, if we could identify that before it flies, that will be a great trade. This is something I m still learning and looking into reactions of volumes as a good 'indicator'.

Do you buy high-volumes stock or low volume stock? There is no right-or-wrong la. We all buy/sell for reasons known to ourselves.

KFC : Registered VERY HIGH volumes on Wed & Thu in a more quiet market last week. I shall see Monday to be high volume too but it might be lower. Another day of UP with lower volume will see me selling as it indicates buyer drying off, and profit-taking will be here. So, I will take profit too. It is at over-bought region now.

KNM : One of the most actively traded stock in KLSE but been 'dormant'(for her standard) for while until recently it dived to 0.40 level with VERY high volume. The volumes subsiding ... and worth noting for a trade. Fundamentally, I never really like KNM.


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