A great company is like a high-performance Porsche. Volume is the stock's fuel. If you desire to master when to sell stocks correctly, remember this analogy. Here is how New Highs In Low Volume can halt a Big Run for a company.
You can go on all day about the company's potential, its fabulous new product, and incredible CEO. But if the company's stock, after making a great run, begins to hit new highs on low volume, it will likely cease to act like a high-performance roadster. The stock may be beginning to put on the brakes on its spectacular run.
After a stock sees a volume dry-up at the peak, be ready to sell at least some shares when it drops very hard through the 50-day moving average on high volume. Or, the stock may shatter a long-term trend line.
A stock's volume often tracks above its 50-day moving average when its price climbs to new high ground. This is where the stock has never been before. There is no overhead resistance, and buyers should be luring offers with their increasing bids.
If this doesn't drum up the increased volume, you have a problem. Remember, too, that the uptrending stock already has had institutional support behind it. That's how it got to be an uptrending stock.
What do you think would happen if the big-money funds stopped buying? The stock would fall under its own weight. And if you find the stock consistently making new highs without solid volume, that's a sign that the tide may be turning. That is, sellers may have more influence over the stock's future prices than the buyers.
Titan made a new high in May. The stock rebounded from its 50-DMA and progressed well on above-average volume. The rally extended further in June–July. But, the gains in July came in poor volume. After making a new high in July, the stock corrected more than 20%. The same price-volume action can be seen during October when Titan made a new high on low volume and corrected more than 20% from there.
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