hard · Volume Price Analysis
A trader identifies a 'spring' pattern where the price dips below a support level. The candle that returns price back into the range is a narrow-spread down candle with volume 2 standard deviations below the mean.
What is the logic behind this bullish interpretation?
- The low volume proves that the insiders encountered no selling pressure below the floor, confirming a successful test.
- The lack of effort indicates the support level is weak and will likely break on the next high-volume attempt.
- The narrow spread on low volume indicates a 'gap' in liquidity where price can accelerate without friction.
- The low volume suggests that retail traders are the ones buying the dip while insiders remain on the sidelines.
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