hard · Volume Price Analysis Validation vs. Anomaly (Spread & Volume)
A stock approaches a well-known resistance level for the third time in two months. On this third approach, the candle has a narrow spread, volume only 0.3x average, and closes mid-range just under the resistance line.
What does this third approach most likely represent?
- A validated breakout is imminent, since three touches of the same resistance level always precede a breakout regardless of the volume behind each touch.
- A test of supply showing diminishing selling interest at the level, which is a constructive sign for an eventual breakout rather than a rejection.
- A bearish anomaly, since any approach to well-known resistance on light volume proves large sellers are quietly building a short position.
- A meaningless repeat, since a third touch of the same level cannot add any new information beyond what the first two touches already showed.
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