medium · Volume Price Analysis testing
A failed test of supply (high volume) is often followed by a 'shakeout.'
How does the volume on the shakeout bar help the practitioner decide if the market is finally ready for markup?
- A shakeout on low volume is an anomaly suggesting the insiders have already lost interest in the stock entirely
- The shakeout must occur on ultra-high volume to prove that insiders remain serious about defending and completing the move
- If the shakeout occurs on low volume, it confirms that the supply found during the failed test has finally been absorbed.
- The volume printed on a shakeout bar is irrelevant to the practitioner; only the depth of the lower wick and its close matter
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