NIKKEI: The cost of ignoring volume divergences
Was watching $NIKKEI last spring, anticipating a pullback after a strong run. Saw price continue to grind higher, but on noticeably diminishing volume each rally attempt. My bias was strong towards a correction, so I kept looking for a short entry. The mistake was not respecting that divergence as a potential indicator of distribution, but rather as 'thin air' that could easily reverse. Ended up trying to pick a top on multiple occasions, getting stopped out each time as price continued to crawl up against my initial thesis. The market was telling me something was changing beneath the surface, but I was fixated on my technical setup, burning capital instead of waiting for a clearer breakdown or re-evaluating the premise altogether. Cost me a chunk, taught me to give more weight to volume dynamics, especially when fighting a trend.
That's a really interesting point about volume divergences. So, you're saying that even if the price is still going up, if the volume is low, it might be a sign that the upward trend isn't sustainable?