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# The Power Of Price And Volume Trends

08/15/00 10:47:02 AM
by Han Kim

To get a better sense of where the security's price is headed, you should consider volume along with price changes. Price changes are viewed with more significance when the volume accompanying the change is high, and conversely with less significance when the volume is low.

Security:   OAKT

 How do you account for variance in volume on a price chart? By using an indicator such as the price and volume trend (PVT). PVT takes the relative change in price of the security, multiplies the accompanying volume, then adds the value from the previous PVT. Here's how to calculate PVT:C = Today's CloseYC = Yesterday's CloseV = Today's VolumeYPVT = Yesterday's PVTPVT = (((C - YC) / YC) * V) + YPVT The general trend of the PVT tells you whether money is flowing in or out of a security. Below is an example of PVT applied to Oak Technology Inc. [OAKT]. In March and April the PVT trendline was clearly on the rise while prices were falling. This divergence indicates that prices were falling on relatively small volumes. Notice that price started to rise again and continued to do so as the PVT continued to rise. A falling price trend during a rising PVT leads to a rally that will last as long as the PVT continues to rise. Graphic provided by: WindowOnWallstreet. In this particular case, the PVT continued to rise indicating that money was still flowing into OAKT. As a result, the prices continued to go up. In conclusion, by using PVT to confirm major trends you will be taking into consideration the magnitude of both the change in price and the corresponding volume.

Han Kim

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