- 27 Kas 2020
- Tepkime puanı
EquiVolume boxes combine price action and volume for easy visual analysis. EquiVolume boxes plot high-low range for length and volume for width. Thin boxes show relatively low volume, while large boxes show relatively high volume. Square or wide boxes reflect high volume with relatively little price action. Even with this additional volume size, graphic artists can easily spot traditional patterns, support / resistance breaks, and flashbacks.
Richard W. Arms Jr. EquiVolume is a price chart that includes volume in each period. EquiVolume charts look similar to candlestick charts, but the candlesticks are replaced by EquiVolume boxes, which can be square or rectangular. Classic patterns like triangles, wedges, and double tops still pop up with the added bonus of having volume built right into the pattern. This makes it easy to validate volume for returns, large moves, support / resistance breaks, and peaks.
An EquiVolume box consists of three components: price high, price low, and volume. The high price sets the upper limit, the low price sets the lower limit, and the volume determines the width. EquiVolume boxes are black when the close is above the previous close and red when the close is below the previous close.
Note that when calculating the EquiVolume plots, the volume is normalized to show as a percentage of the lookback time. For a four-month daily chart, the volume of each day is divided by the total volume for the review period (four months). Therefore, the width of each box represents the percentage of total volume for the lookback period. Large volume days occupy more space on the X axis (horizontal) than low volume days. Variable width this means that the date axis is generally not uniform in EquiVolume charts. Some weeks will be longer due to wide candlesticks while others will be shorter due to narrow candlesticks. Chart 2 shows a high-low-close bar graph for Kraft Foods (KFT) with volume and a normal X-axis. Graphic 3, It depicts the same four-month period using EquiVolume boxes. Large boxes indicate relatively high volume days, while thin boxes indicate relatively low volume days. Also note that many wide boxes can stretch the whole moon on the X axis; For example, in the EquiVolume chart, January is much wider than the normal high-low-close bar chart.
Support / Resistance Breaks
Volume is important to justify a movement, especially support or resistance breaks. A low-pitched break isn't as convincing as taking a high-pitched break. Low volume indicates lukewarm interest and weak buying or selling pressure. On the contrary, high volume reflects increased interest and strong buying or selling pressure. Chart 4 shows Caterpillar (CAT) with two small breakouts followed by one large break. The stock formed a falling wedge in early July and broke the trend line with the widest EquiVolume box in more than a month. A break above the late June high was followed by a gap and another wide candlestick. Purchasing pressure slowed collecting steam. The final and greatest break occurred with another gap and went above 38. This EquiVolume box, It's undoubtedly the largest in the past two months, which means buying pressure is the strongest in two months. Volume clearly confirmed these breaks.
Graph 5 shows the Intuit (INTU) break support with a large EquiVolume box. The move showed strong selling pressure that broke the September lows.
High volume movements can also signal the beginning of a trend. Chart 6 shows the downward trend of Alcoa (AA) from early January to early March. The stock hardened around 5-6 in March and then exploded with a large EquiVolume box. This was the largest box in months. Such strong buying pressure confirmed the reversal and heralded a return to January highs.
Chart 7 shows Goldman Sachs (GS) reversing the uptrend with three red EquiVolume boxes. The stock rose above 345 in late October, but fell sharply in early November with the long red wide EquiVolume box. Two longer red wide EquiVolume boxes followed as it broke the support at the Stock 210. These three EquiVolume boxes together showed that the selling pressure was intensified. Goldman Sachs managed to get over 235, but these EquiVolume boxes were narrower due to the lower volume. The bullish volume at bounce was weaker than the bearish volume at the support break. This bounce, devoid of conviction, failed and the stock moved to new reaction lows in the coming months.