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question about GameStop price drop without trade volume increase

I would be very interested if someone could explain to me why there is such a significant price drop in price for the GameStop stock on an hourly chart without a corresponding significant increase in trade volume according to this chart? I would think that significant drop in price would correspond with significant increase in sell volume when all the people holding this GME stock decide to take profits while they still can, but I do not see obvious increase in trade volume. By the way, I notice same pattern with other securities as well where I see significant changes in price, but without corresponding obvious changes in trade volume. Intuitively it makes sense that significant changes in price would correlate with significant changes in trade volume, but quite often I just do not see this relation reflected on charts. I would appreciate if someone could explain what is the reason for this behavior.



Thank you in advance,

Artem

Comments

  • markdmarkd mod
    edited January 28
    Price changes and volume are not necessarily related.

    You can have several scenarios

    big volume and little price change - means that for every share for sale at a price, there are dollars available to buy the shares, so the price doesn't have to change.

    big volume and a lot of price change up - the shares available at a certain price are not enough to satisfy the demand at that price, and buyers are willing to keep bidding up

    big volume and a lot of price change down - there are not enough dollars available to buy the shares offered at a certain price and sellers are willing to drop their prices to dump their shares.

    small volume and little price change - there is not much interest in either buying or selling

    small volume and big price change up - there are few sellers and even a big premium can't get many to sell

    small volume and big price change down - there are few buyers and even a good discount doesn't draw them out.

    So, price change has to do with the balance of shares for sale vs. dollars available to buy them at each price, and the willingness of buyers and sellers to accept a discount or pay a premium.

    In the particular case of GME and a few others, apparently several brokers stopped taking buy orders from retail customers but let them sell. So, since there were many fewer buyers to bid for the shares, sellers had to take a discount.
  • markd, is there a setting on our charts that show the percentages of buys vs sales, and is there one on think or swim? Thank you :)
  • lmkwinlmkwin ✭✭
    edited March 12
    Just my opinion, but Volume by Price indicator is very good at showing interest at different levels. Start out with 10 in the parameter field and modify it whichever way you want to see it.

    If you have different colors for Up and Down, and then Color the Volume checked it will separate the Volume by price into two corresponding colors.



    On ACP you can put the Volume by Price on the Left OR the right. In Legacy, it's only on the left.


    https://school.stockcharts.com/doku.php?id=technical_indicators:volume_by_price

    On TOS it's called a Volume Profile. They have a couple to choose from.


  • markdmarkd mod
    edited March 12
    I will go with lmkwin's answer.

    But, I also think the pattern of the candle tells you a lot. Long body means 1 sided trading. Wicks and tails mean two-sided (balanced) trading.

    You could also look at Wilder's Equivolume candles (select it from the "Type" drop down in the "Chart Attributes" section.

    Also, Elder's Force Index indicator is pretty good at describing the balance of buyers and sellers - above the zero line, buyers in charge, below the zero line sellers in charge. Crossing zero, crossing past Force peaks, and divergences (e.g. higher price peak vs. lower Force peak) can all be directional tell-tales. Of course, you get different results with different parameters, so you would have to experiment to see what fits your approach.
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