Negative correlation between price and volume development

Negative correlation between price development and volume development is a sign of weakness. It shows high sell interest near bottoms in the price chart, and low buy interest near price tops. This indicates that investors who have already sold the stock and those who consider selling both believe that the price will fall.

Correlation between price and volume development is considered an important indicator. It is often used alongside trend analysis and other indicators based on the stock price.

The chart shows negative correlation between price development and volume development when the stock is in a falling trend. This volume development confirms the negative mood among investors and indicates that the falling trend will continue.

 

There can also be negative correlation when a stock is in a rising trend. It then signals that the strength of the rising trend is waning and a reversal may happen in the near future.

 

The following applies to negative correlation between price and volume development:

  • Strengthens a sell signal
  • Weakens a buy signal
  • Indicates that investors are negative and the falling trend will continue
  • Indicates that buyers are passive, a rising trend is ending and a trend reversal is near

Thus negative correlation between price and volume development is a warning sign of a coming falling trend. Negative correlation indicates weak buyers and aggressive sellers and thereby negative development of the investors’ view of the stock. Such a stock is indicated to continue falling.

Stocks withNegative correlation between price and volume development

Microsoft
Merck & Co
Caterpillar
Honeywell International
Dow
 


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.

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