medium · Volume Price Analysis support-resistance
An equity day trader sees a stock gap up at the open. The first 5-minute candle is a wide-spread up bar, but the volume is remarkably low. The second 5-minute candle is a 'Shooting Star' on very high volume.
What is the diagnosis?
- The '1% Rule' governs position sizing only, yet it still suggests entering long above this shooting star's high.
- The stock is in an early 'Accumulation' phase, and the low-volume first candle represents classic stopping volume near this support.
- A genuine 'Markup' phase has now clearly begun, and the shooting star represents a successful, low-volume test of demand.
- The gap up was a 'Trap Up' manufactured by market makers, confirmed by the absorption and rejection in the second candle.
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