Why Volume and Price Movement Don’t Always Happen Simultaneously
1. Volume as a Leading Indicator
Volume often precedes price movement because it reflects accumulation or distribution. When traders or institutions start accumulating shares quietly, the price might not move much at first, but volume begins to increase subtly. Once enough shares are accumulated and selling pressure dries up, price breaks out—which is what we see in the MODV chart.
2. Absorption of Supply
In the late May to early June timeframe, you see volume spikes before the price breakout.
This suggests:
- Buyers are stepping in,
- Sellers are being absorbed,
- The stock is being accumulated at low prices.
- When there's high volume, the market may be absorbing those trades (buyers meet sellers evenly), so price stays flat.
- Price only surges after the supply is absorbed and demand outweighs supply, causing a breakout.
- Once the supply-demand imbalance becomes obvious (e.g., more buyers left), the price begins to trend—as happened in early June.
3. Market Maker Behavior
Market makers and big players often accumulate shares over time at stable prices to avoid drawing attention. Once they’re done accumulating, they allow the price to rise—creating what’s known as a "markup phase".
4. Psychological Lag
There is often a psychological lag in the market:
- Volume may rise because informed traders are acting early.
- Retail or less-informed traders enter after the price starts moving, amplifying the breakout.
5. Short Covering & Positioning
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Short volume was also elevated around the volume spike. After that, the stock rallied—this could indicate short covering that added buying pressure after the initial volume spike.
In MODV’s Case:
Volume spiked in late May and early June.
- Price stayed flat initially—indicating accumulation.
- Around early June, price exploded upwards—indicating the start of the markup phase.
- The stock continued to move up into a consolidation phase, where volume dropped and price stabilized.
Conclusion:
Volume is a critical early signal. The delay between volume increase and price movement is common and often indicates smart money activity. Watching these patterns can help traders anticipate breakouts before they occur.