The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question – “Does volume play an important role in future stock direction?” I think of course, volume plays an important role. I don’t think it’s the ultimate indicator for future stock direction, but in many cases, when you are looking at a stock chart and in particular, when you see a large movement in the underlying shares, whether that’s a large move up on the day or a large move down on the day, what many people want to see is a large spike in volume as a confirmation that that move is supported by a lot of market participants. When we see a stock rally and it’s rallying on light volume, we may think to ourselves – “Well, the stock rally is not really being supported by all this influx of new additional buyers coming in.” And so, if the stock lunges to a new high or a higher high and that is then supported by a huge spike in volume, we could then think to ourselves that it’s impossi