After studying this chapter, you should be able to:
Although price is regarded as the best indicator of potential future price behavior, volume and open interest offer additional evidence to corroborate bullish or bearish setups. Volume and open interest can indicate potential underlying weakness and also function as timing indicators for potential breakouts. Many novices misread declining volume as a weakness in a consolidation. The relationship between volume with bar range also offers critical insights into the actions of buyers and sellers, especially when extremely low or high volume is accompanied by unusually large or narrow bar ranges, respectively. Mastery over the interpretation of volume and open interest action is of paramount importance to the art and science of forecasting potential price activity in the markets.
We learned in Chapter 2 that under the tenets ...