In the previous post here we looked at the NiftyScalper Advanced Relative Strength Indicator which is a Price based internals indicator, in this post we will look at the next piece of the puzzle ie Volume.
If you read about internals for the US Markets you will come across something called NYSE UpVol and NYSE DownVol, more about it here.
Unfortunately our indexes don’t broadcast this info. But what do you do when you need something badly and cant get it, you build it.
Yes, that’s what we did, we created our own NIFTY UpVol-DownVol indicator for the top 25 stocks.
Do note that, instead of a ratio we decided to look at the Net Volumes as we would also get a sense of liquidity/participation along with the direction.
As you can see in the above image, there is a massive net sell in the volumes of the constituent stocks, now follow the price action in the next 30 to 45 minutes. Lets move to the next idea.
Based on a suggestion from a fellow trader and friend Navdeep we came up with a variant of NIFTY UpVol-DownVol which we call NIFTY UpValue-DownValue, here we look at not just the volume but Value i.e Volume * Price. This helps us normalize for situation where the volumes could be skewed due to higher or lower face values of stock prices. It also helps us recognize situations where only a few key stocks try to pull the index up or drag it down.
Look at the image below
You an see there was buying that was initiated, perhaps in a few stocks (quite heavily) hence reflecting in the Up-Down Value but Up-Down Vol remains in the red. As you would imagine this was a narrow range day with a tug of war between a few heavy weights and rest of the index.
As I sign off, I must contend that I these Internals based Indicators have really saved me a lot of head and heartache. I am able to filter out contexts that I don’t want to trade, quite well.
Update: 16th Jan’19
I found a similar spike in the CumVol, this time on the upside as discussed in the first image. Notice the price action after that.