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Technical AnalysisV
Volume Divergence Reversal
A reversal signal that occurs when price continues to make new highs (or new lows) while volume progressively decreases, indicating weakening participation and conviction in the trend. The divergence between price direction and volume suggests that fewer market participants are driving the price movement, making it vulnerable to a reversal. Volume divergence reversals are a key component of many technical analysis frameworks including Dow Theory and Wyckoff methodology.
Example
“The index pushed to three consecutive new highs over two weeks, but each rally occurred on declining volume, setting up a volume divergence reversal that led to a 5% correction.”