Interpreting open interest & volumes

#1
Trading Wizheads,

Can you please clarify me the following

1. If the volumes are going down and the price of stock is going DOWN, what should be interpreted.
2. If the volumes are going down and the price of stock is going UP, what should be interpreted
3. How can Put Call Ratio data help in interpreting the market trend? Also what is the difference between PCR OI and PCR Vol

thanks
Ravi


These are the basics I am aware of

If volume is relatively high while the market is going up and remains relatively low during corrections, the inference is that the market is in a strong uptrend, which should continue.

If volume is high while the market is going down and relatively light during upward retracements, then the market is weak with a continuing downward trend likely.

If both open interest and prices are increasing, then new buyers are being brought into the market with a strong technical picture unfolding. Expect the uptrend to continue.

If on the other hand, open interest is increasing while prices decline, short sellers have the upper hand in a technically weak market. As open interest is growing while prices decline, buyers are obviously the more aggressive party.

In the event of open interest declining while prices are also slipping, liquidation by long positions is the implication, therefore suggesting a technically strong market overall. In other words, the market is strong as open interest declining suggests no new aggressive shorts, as this would entail an increase in open interest.

When open interest is declining and prices are increasing, short covering is the most likely cause suggesting that overall the market is weak - i.e. attracting new buyers would be required for a technically strong market and consequently open interest would rise.
 
#3
Agilent,

Thanks for the link, has cleared all my questions except this one.

3. How can Put Call Ratio data help in interpreting the market trend? Also what is the difference between PCR OI and PCR Vol

thanks,
Ravi
 
#4
Agilent,

Thanks for the link, has cleared all my questions except this one.

3. How can Put Call Ratio data help in interpreting the market trend? Also what is the difference between PCR OI and PCR Vol

thanks,
Ravi
What are these terms anyway . I know what is PCR and what is OI, but PCR OI? Likewise PCR Vol?

As for interpretation of PCR, stand by

AGILENT
 

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