Absorption Volume
Volume Spread Analysis glossary · Supply & Demand / Smart Money
Definition
A high-volume down-bar that closes below the previous bar on a wide spread but recovers to close at or near its high, indicating that professionals are absorbing supply at that level—either to fill institutional buy orders or because they are bullish for their own accounts. Typically appears during a decline or at the bottom of a trading range. The market may not reverse immediately; it often drifts sideways while the absorbed supply is digested. A subsequent low-volume test of the absorption area confirms that the buying was genuine and that the up-move is imminent.
Absorption Volume in plain English
'Absorption' means big buyers are soaking up all the shares being sold, like a sponge soaking up a spill so it never spreads. On the chart it looks like a heavy-volume down-bar with a wide range: the price dips below the previous bar but then climbs back to close near its high — a tug-of-war where the buyers won by the end. It shows professionals mopping up supply, either to fill huge orders or because they expect prices to rise. The market may just drift sideways for a while as that supply gets 'digested,' and the real tell comes later: if the price revisits that area on LOW volume (few sellers left), it confirms the buying was genuine and a move up is near.
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