hard · Volume Price Analysis Climactic Price Action & Reversal Dynamics
An index has been trending down for months. Volume on down candles has been steadily shrinking for the last three weeks even as price makes marginal new lows, while volume on the occasional up candles during that same window has been gradually increasing.
What does this three-week divergence between shrinking down-volume and rising up-volume most likely indicate about the approaching Buying Climax?
- Supply is quietly being absorbed early on, so the eventual Buying Climax candle itself may prove far less violent.
- The divergence is simply irrelevant noise here, since only the climax candle itself ever carries any real meaning.
- Shrinking down-volume proves that sellers are actually gaining strength before one final, violent leg lower forms.
- Rising up-volume on the rallies proves distribution, so the next major move simply must be yet another leg down.
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