hard · Volume Price Analysis support-resistance
A stock breaks above a well-defined resistance shelf on a wide-spread bar with volume 2.5x average, a clear Sign of Strength. Over the next four sessions it drifts back down toward that same shelf, but each successive bar has a narrower spread and steadily lower volume than the last.
What does this pullback most likely confirm?
- A healthy backing up to the edge of the creek, where fading volume shows no real supply remains to reclaim the old ceiling.
- The breakout has failed, since any return toward the old resistance level proves the initial Sign of Strength was a trap.
- A fresh distribution phase is starting, because pullbacks after strong breakouts always attract heavy institutional selling.
- The stock is overbought, and the diminishing volume signals a much deeper correction is now imminent.
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