medium · Volume Price Analysis
A stock trades in a narrow range for five hours on 60% of normal volume. At 2:00 PM, a news announcement triggers a wide-spread up candle on 5× volume.
How should the reliability of this breakout be assessed?
- Unreliable; 5x volume signals a blow-off climax, and the breakout should be faded here.
- Suspect; the tight range suggests insiders were quietly distributing shares to the public before the news hit.
- Highly reliable; the 'Cause' of the consolidation has produced a validated 'Effect' on the breakout.
- Neutral; any news-driven candle is automatically treated as a manufactured trap regardless of size.
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