P&F and Volume.

[DJ South]

This article written by DWA immediately jumped out at me. Volume is rarely spoken about but when a customer of DWA e-mailed in with a few questions in regards to the quote below, here is the response:

"`Technicians should be losing sleep over this,' said Ralph Acampora, the 40-year Wall Street veteran who helped pioneer technical analysis. `I can't be as trusting of my indicator, because I don't have all the data ... More volume means there's more money and support, more demand and momentum, you need money to push stocks up.'"

Source: NYSE Trading Falls to 7-Year Low as U.S. Volume Rises

Dorsey Wright:
We are not privy to the types of indicators Ralph looks at so we can't comment on that but we do want to discuss what the shift in trading volume from the NYSE to other exchanges means to a Point & Figure chart, our specialty. While volume is a significant component of some forms of technical analysis, it is not however a factor in Point & Figure research. When Charles Dow first developed the PnF chart in the late-1800's he did so with the eye of a curious fundamentalist. He was not trying to establish a complicated and highly sophisticated mechanism for predicting price movement, but rather just an organized way of recording it. He recognized that the outcome of the daily battle between all sellers and buyers is resolved by price. If there are more buyers than sellers willing to sell at a particular price, the price will rise. It is that simple, and the Point & Figure chart does nothing more than record price in an uncluttered fashion. Volume is not a primary consideration in our research, price is. When we see technically significant breakouts from stocks that are in strong sectors when the market is on offense, we go with them rather than ask what volume of shares these stocks traded on the day of the breakout. Each of the charts below met the criteria we just mentioned, one printing a major breakout with very average volume (X), the other producing a similar breakout with above-average volume (OXY). From our perspective we don't approach the situation differently in either case, the weight of the evidence was positive and the outcome has been as well.

This is not to say that volume is not a useful input within the context of other forms of technical analysis, it is simply not an input that we incorporate in our research. We have found that price analysis has produced robust results when applied consistently and methodically with discipline. The beautiful thing about Wall Street is that there are many millions of ways to be successful, if perhaps only a handful that are successful consistently over time. At any rate, we are often asked how volume factors into our process and, with respect to the Point & Figure chart, it simply doesn't.