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Typically, volume activity follows certain predictable patterns throughout the trading day. High levels are prevalent immediately after the open and toward the close; lower values are usually seen around noon (see Chart 1 below):

Chart 1. Typical Intraday Volume

The patent pending technology underlying Modulated Volume smoothes out these typical diurnal volume spikes, thus highlighting and exposing unusual volume activity.

Chart 2. Modulated Intraday Volume

By Modulating volume activity, we draw attention to volume surges that are not caused by the typical variations found during every trading day. Instead, we uncover the atypical volume activity that might be caused by overwhelming buying or panic selling (see Chart). As a general rule, atypical volume surges that appear during price advances lead to the downside trend reversals while volume surges during price declines lead to index reversals to the upside.

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