Using percent scales zeroed at 12 March’s closing price and cumulative volume total, we see that, on 17 August, both price and demand (increase in cumulative volume) had increased. However, as of 13 October, price had decreased whereas demand had increased. In effect, we see a shrinking supply and growing demand.
For convergence, the volume line should increase as price increases and decrease as price decreases. However, since 17 Aug, price and volume have diverged, that is price decreased as cumulative volume increased. This divergence serves as a probable bullish indicator because it means, despite the price decrease, more buyers continue to accept an ask price than sellers accept a bid price.
Edit: you can press play and then zero the scales to 17 Aug by expanding/sliding the chart until 17 Aug is the first visible date. In doing so, we see that price decreased about 19% whereas volume increased about 6% relative to 17 Aug’s closing values.
For convergence, the volume line should increase as price increases and decrease as price decreases. However, since 17 Aug, price and volume have diverged, that is price decreased as cumulative volume increased. This divergence serves as a probable bullish indicator because it means, despite the price decrease, more buyers continue to accept an ask price than sellers accept a bid price.
Edit: you can press play and then zero the scales to 17 Aug by expanding/sliding the chart until 17 Aug is the first visible date. In doing so, we see that price decreased about 19% whereas volume increased about 6% relative to 17 Aug’s closing values.
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Market cycle analysis that aligns with the divergence described above.
