Volume Dry-Ups Before Breakouts

Why volume often shrinks to very low levels just before a stock breaks out of a base, and how to use the dry-up and the breakout-day surge together.

Quiet before the move

As a stock builds a base, the sellers who wanted out gradually finish selling. Price swings narrow, and daily volume shrinks. Traders call this a volume dry-up. It suggests supply is running low: few holders still want to sell at these prices.

A dry-up by itself does not tell you when a stock will move or in which direction. It tells you the stock is in balance and a larger move may be coming. The breakout day, when price clears the top of the base on a surge of volume, is the confirmation.

Illustration: volume shrinks as the base tightens, then surges on the breakout day.

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