For as long as I can remember, one of the most basic technical indicators has been to monitor volume. In fact, volume as a confirmation for a move was probably the single most important indicator of all. So, what does one do about a breakout or even a breakdown, that occurs on lower volume?

I know this is going to sound like treacherous mutiny to the our long term readers, but I am here to say that volume isn't the end all that one would think. Just think back a few weeks where the market was drifting higher on low volume. Did it matter that XYZ went from 35 to 40 dollars on low volume, or was it much more important that they simply made the move? See the point?

When we are looking at a stock on a chart, we might say something like this "we will take a shot at XYZ if they can get over the 35.50 area". But very rarely do we mention the volume. Certainly we'd like that breakout to be confirmed by higher volume, but guess what? Often when the overall market is suffering form low volumes, we see stocks break out left and right and their "higher volume" doesn't even add up to their average daily volume! Are we to ignore the move because it wasn't confirmed? No way. In fact, in many cases we have been watching, we see that it's the breakout that brings in the volume, instead of the other way around.

In the past month or so because of economic reports, and the war and what have you, the overall market volume has been below average. Naturally it stands to reason that individual stock volumes are down a bit too. If you see a situation like that where a stock is about to break out but it's not trading on above average volume, I do not believe you can ignore that breakout. I think you have to go for the breakout and hope that the volume finds it's way to the stock. Sure it's riskier than waiting for volume to actually make the breakout happen, but again, with low overall market volume you would simply miss too many opportunities. My feeling is that you have to play the breakout, hope for the volume to catch up and send things higher, and then if it does, fine, if it doesn't simply keep your stop tighter and watch it more closely. I saw a lot of stocks move higher on much lower than average volume and kept us out of plays we could have profited from. We'd rather not make that mistake again, what do you think?

http://clix.to/wallmann