When a stock takes off or breaks out of a bullish formation you must have a 50% or more increase in volume to validate the move. This works just like the thrusters on the space shuttle. The greater the volume, the greater the thrust to propel a stock higher! You always want to see that surge of buying in a stock. It validates your opinion that it is a stock you want to own because it obvious that everyone else wants to own it too. This upward movement on increased volume creates momentum which pushes the stock high and in turn brings in more buyers.

The same holds true for the market. The only way to confirm if the price action you are seeing is real is to see if you have a huge increase in volume to confirm it.

According to Bill O’Neil, founder of IBD, you would like to see a 1% or greater move in the market averages with an increase in volume from the prior trading day. This is called a “follow through day.” All major market moves have started with this type of price and volume action.

Volume confirms price action….IT IS JUST COMMON SENSE.

Don't panic in those early minutes when your stock opens underwater. Keep a level head and know the first half hour is often bizarre. If an hour of trading goes by and your stock hasn't done squat, it's time to consider alternatives, but if it's making it's way back up, it's usually best to keep it in play.

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