$USDC 📘 Stock Price Behavior Analysis Course
Session 19: Understanding the Price-Volume Relationship
Price movement shows the direction of a trend, while trading volume reflects the strength behind it — revealing the market's true sentiment. In this session, we’ll break down the foundational logic of how price and volume interact, a key principle in analyzing market behavior.
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🔹 1. Four Core Price-Volume Patterns
1. Price Up + Volume Up → Strong Uptrend
Indicates solid buying momentum. Increased participation confirms a healthy and sustainable uptrend.
2. Price Down + Volume Up → Panic Selling
High-volume declines signal strong bearish pressure, often leading to a rapid acceleration downward.
3. Price Up + Volume Down → Weak Uptrend
Rising prices without rising volume show a lack of conviction — suggesting a possible fake breakout or fragile rally.
4. Price Down + Volume Down → Weak Selling or Consolidation
Low-volume declines may reflect a loss of selling interest, potential bottoming out, or sideways consolidation.
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🔹 2. Volume Leads Price: A Key Signal
When volume surges before a price breakout, it can indicate early activity by major players entering the market.
If price reaches new highs but volume fails to confirm, it signals weakening momentum — a possible warning of reversal.
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🔹 3. Applying the Price-Volume Relationship in Practice
Always check whether a breakout is supported by rising volume — this helps distinguish real breakouts from false ones.
When price and volume move together, the trend is generally strong and reliable.
Divergence between price and volume often signals exhaustion or an upcoming trend change — stay alert.
