It focuses on using volume shrinkage or expansion to identify buy/sell signals, reversals, and false breakouts.

Let’s break down the key insights from each section:

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### Figure 4A and 4B: Buy/Sell Signals Based on Volume Shrinkage

- Concept: When price tests a previous high/low, the change in volume is more important than the actual volume figure.

- Sell Signal (Figure 4A):

- Volume shrinks consistently (e.g., 115K → 105K).

- If the final test shows less than 8% shrinkage, but still more than 3%, it's in “no man's land” — caution zone.

- If the test happens with less than 8% volume of the first high/low, expect a reversal (sell).

- Buy Signal (Figure 4B):

- Same principle in reverse.

- Volume shrinkage shows weakness in the move down, suggesting a potential reversal up.

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### Figure 4: Comparing Volume on Retests

- Even on the 3rd or 4th retest, compare volume to the first high/low.

- If volume is equal to or greater than the original and price exceeds it, expect continuation.

- If volume is less than 8%, expect a reversal.

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### Figure 5: Reversing Back Into Trading Range

Key points:

1. < 3% change in volume on retest implies likely breakout (not reversal).

2. Use percentage shrinkage/increase, not raw volume.

3. If price fails to exceed the previous high/low and volume shrinks by at least 8%, expect reversal.

4. If it exceeds with equal or greater volume, expect continuation.

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### Figure 6: False Breakouts

- If price breaks high/low with 8%+ volume shrinkage, and then returns into the range, it's a false break.

- Example:

- First test at 100K vol, next at 90K vol (10% shrinkage) = likely fakeout.

- Monitor whether price re-enters the range to confirm.

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### Important Notes:

- Apply these rules even to gaps or support/resistance zones.

- A consistent volume pattern helps you anticipate breakouts or reversals.

- 3% margin: If volume change is within this, assume continuation.

Application Tip:

This method is especially useful in range-bound markets or during retests of breakout levels. It helps traders avoid traps (fakeouts) and time entries based on the volume conviction behind a price move.