medium · Volume Price Analysis testing
A currency pair has fallen into a buying climax. After a sideways accumulation period, the insiders execute a 'spring' move that dips below the floor. The spring bar is a hammer with a deep lower wick on volume significantly lower than the preceding decline.
What does this indicate for the subsequent test?
- The low volume indicates that the insiders have withdrawn and the bearish markdown will continue.
- The spring is a market-maker trap designed to lure buyers into a false breakout to the upside.
- The spring is a failed test because it did not generate high volume to validate the hammer's strength.
- The spring itself serves as a successful test of supply, confirming sellers have been shaken out.
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