Low volume; good, bad, or indifferent?

By Jani Ziedins | Intraday Analysis

Mar 23

I find the low volume declines over the last few days interesting. It potentially shows traders are no longer worried about a pullback and are sitting with their positions even in the face of a modest slide. Compare this with the March 6th slide that turned into a self-induced cascade due to heightened fears of a pullback.

Conventional wisdom says this calm during a sell-off is bullish. But a contrarian would suggest this newly found complacency toward a pullback is the exact ingredient necessary for a pullback.

In full disclosure, I closed out my positions today and was content with the profit I made. No doubt the market will head higher over the next few days, but personally I thought today was a good time to cash in and wait for the next buying opportunity. I can’t make all the money and it is a fools game to try.

I had some reservations about selling because it seems like highly rated stocks were holding up well while the index sank today. This shows strength and support for these names and no doubt I’ll probably buy some of them back higher. But I’m okay with that. I prefer selling into strength and that is just how it goes.

What I did makes sense for me and my trading style. Everyone needs to make their own plan and then follow it.


About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.