medium · Volume Price Analysis
Following a prolonged price waterfall, a stock prints three consecutive candles with narrowing bodies and progressively deeper lower wicks on rising, above-average volume.
How should a practitioner interpret this sequence?
- This is a trap down move designed to lure buyers into what is actually still a falling market.
- The trend is accelerating downward simply because volume is increasing from bar to bar.
- This is stopping volume, indicating insiders are beginning to absorb the selling pressure.
- This is a selling climax, indicating that insiders are dumping the last of their inventory here.
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