In the context of technical analysis, what does volume indicate?

Volume in technical analysis serves as a vital indicator of the strength or weakness of a price trend. When analyzing price movements, elevated volume typically suggests that there is strong investor interest behind a move, either upward or downward. This can be indicative of a strong trend, as a significant price change accompanied by high volume implies that the trend is likely to continue.

Furthermore, volume can also signal potential reversals in price action. For instance, if a stock is on an upward trajectory but begins to see declining volume, it may hint at a weakening trend, suggesting that a reversal could be on the horizon. Conversely, if an asset's price is declining but experiences a surge in volume, this could also signal a potential reversal to the upside.

The emotional state of traders, while an interesting aspect of market behavior, is not directly measured through volume. Similarly, volume does not just reflect market hours pricing or future company valuations, which makes those options less applicable in the context of technical analysis. Hence, understanding volume's relationship with price trends and reversals allows traders and analysts to make more informed decisions.