medium · Order Flow Analysis absorption-exhaustion-imbalance
You observe a 5-minute bar where the bottom three price levels are red (selling imbalances), but the top four price levels transition to bright green (buying imbalances), and the bar closes near its high.
What is the most likely narrative for this bar?
- Sellers pushed price down initially, but aggressive buyers took control and drove a recovery.
- The market found fair value at the bottom of the bar, leading to balanced two-sided trade.
- Buyers were trapped at the low of the bar and forced to liquidate as price rose.
- Institutional sellers are 'capping' the market by absorbing all aggressive buys at the high.
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