hard · Volume Price Analysis testing
Following a strong markup phase, price pauses and forms a narrow-spread bar with volume 0.9x average that closes unchanged from the prior bar's close. The next bar is also narrow-spread, closing up slightly, but volume falls further to 0.4x average.
What is the most defensible reading of these two consecutive bars?
- A no-demand condition is developing, since narrowing spread on an up-close alongside falling volume shows buyers losing interest after the advance.
- This is an accumulation stopping volume signature, since narrow spreads after a markup always indicate large operators building a fresh position.
- The falling volume indicates supply has been fully absorbed, so a breakout to new highs on the next bar is now guaranteed regardless of its volume.
- The first bar's unchanged close on near-average volume confirms strong demand, and the second bar's rally on lower volume simply extends that strength.
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