How I use volume to tell if a stock is being accumulated before a move

One thing that completely changed my entries was learning to read what volume is actually telling you inside a trading range. Most people just look at whether volume is high or low but thats only half the story.

When a stock is sitting in a range and going nowhere, check what volume does on red candles vs green candles. If volume is shrinking on the drops and expanding on the pushes higher, thats usually a sign that sellers are drying up and bigger players are absorbing shares. Richard Wyckoff wrote about this almost 100 years ago and it still works because institutions still have the same problem. They cant buy everything at once without moving the price against themselves.

The setup I look for is pretty straightforward. Stock has been in a range for at least 2 to 3 weeks. Volume declining on the dips. Then you get a spring where price briefly breaks below support on low volume and snaps right back. Thats usually institutions grabbing the last cheap shares before they let it move. The entry is the snap back into the range or the first breakout on strong volume after the spring.

I backtested this across about 240 stocks over 20 years and the daily signals had around a 58% hit rate at 40 days. Not life changing on its own but when the weekly chart shows the same accumulation pattern at the same time it goes up to about 65%. The worst periods were 2008 and 2022 where it dropped below 50% because macro selling just overwhelms everything.

The volume part is what most people skip. Price alone will trick you. A stock can look like its breaking out but if volume isnt confirming it, its probably a trap. And a stock can look dead in a range but if you read the volume right its actually loading up for a move.