Constructing volume-budget targets after a breakout

How the volume-scaled chart is drawn

Volume-price analysis places traded volume on the horizontal axis. Each period is a volume-scaled box whose top and bottom are the session high and low and whose width is that session's volume, so the plot advances horizontally with activity rather than with calendar time.

The construction treats price change as a function of trading rather than elapsed time. Under that volume function, equal horizontal distances represent similar amounts of volume, not similar elapsed time.

Measure the sideways width only after breakout

The width of an accumulation or distribution is measured only after a breakout is visible. A breakout is a decisive exit from a sideways accumulation or distribution. That exit is what first authorizes measuring the area's width, and it is what lets the analyst go back and mark where the sideways area began.

A clearly bounded sideways zone is often framed by two tall sessions at either end. The horizontal width between those ends is the bounding-wall span. That span is the quantity copied forward as the volume budget.

Project the same activity width onto the swing

The bounding-wall span is then projected along the volume axis to mark where the next swing is expected to exhaust a similar amount of activity. The measured move is that volume-to-volume projection: the horizontal width of the completed consolidation is copied onto the ensuing swing to estimate where a similar amount of activity will be expended.

The quantity being matched is lateral volume expended in the base versus the swing, not the size of the price change, because price distance also depends on how steep the move is.

Narrow bases on this scale are described as preceding shorter, quicker swings, while wide bases are described as preceding longer swings, on the premise that a large accumulated volume is later unwound over a similarly large subsequent volume.

How the archive examples were marked

In the daily mining-stock example from early 1990, the marked accumulation contained 15 boxes and the following advance contained 8 boxes, yet the two horizontal volume spans were nearly the same.

The same width-projection steps were applied on a three-day bond chart spanning two years, including a long accumulation whose breakout defined the measured advance and a narrow top whose projected decline ended quickly.

The volume-to-volume match is presented as an approximation that can be used on swings of many sizes, not as a construction that is expected to land exactly on every instance.