easy · Volume Price Analysis support-resistance
A stock breaks above a well-defined resistance level of 62.00 with a candle closing at 63.50. The volume is 1.1× the 20-period average. The next candle is a shooting star on 2.5× volume.
What should the trader do?
- Add to the long position because the high volume on the shooting star indicates institutional 'absorption' of sellers.
- Hold the long position, as the shooting star is merely a test of demand above $62.00.
- Move the stop loss to $62.00 and wait for the Value Area to expand higher.
- Exit any long positions and consider a short entry, as the breakout has been revealed as a trap.
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