II.15. Why volumes are important when making decisions?

Let’s answer this question using the example of Fig.75, which shows the graph of the price change of the Mechel JSC stock. What information does the volume give us in this particular case?

In volume 1, three increasing volumes of purchases appeared. The third column of volume was larger than the other two and gave a strong bar up. This was followed by a test – four declining sales volumes that did not break through the bottom of a strong purchase bar earlier. If so, then the buyer shows himself again by giving one volume of the same level as before in volume 2, which gave a huge bar up and no resistance. The buyer decides to continue the attack and gives a larger volume of purchases, but encounters strong resistance, literally returning the price to the beginning of the bar. Next, the market oscillates around the price level of 156 and falls down in volume 4. We note that this volume column displays an increased volume of purchases. So the buyer didn’t leave. The next red volume of the test confirms that there is a buyer, because the price has not moved and then the buyer manifests himself by returning the price up. Next, we see the continuation of the price tossing up in green volumes, an increase in pressure in volume 5 and a misfire at level 163, where there is a strong seller. The buyer gives the test up, but the market then collapses down to volume 6, where the buyer picks up the price again. Thus, the ability to read the price chart together with volumes gives much more accurate information about entry points.

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