hard · Volume Price Analysis Climactic Price Action & Reversal Dynamics
Near the top of a rally, a stock prints a wide-spread up candle on the highest volume of the year, closing near its high, which a trader labels strong demand. Three sessions later an identical wide-spread up candle appears on similarly enormous volume, again closing near its high, and price is now noticeably higher.
What does this second candle imply about the first, given the continued strong closes?
- It reinforces the demand reading, since demand is clearly still absorbing all the supply here.
- It proves the first was distribution, since a second wide-spread candle at new highs confirms a top.
- Neither candle matters without a reversal candle, since strong closes carry no meaning alone.
- The second candle is a No Supply bar, confirming sellers have vanished from the market.
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