hard · Volume Price Analysis validation
A stock breaks above a 12-week consolidation zone. The breakout candle is wide-spread and volume is 1.8× the average. The next three candles are narrow-spread up candles with volume at 0.4×, 0.3×, and 0.25× of the breakout candle.
What is the diagnosis?
- The insiders are testing supply at the new levels before launching a massive markup phase.
- The trend is already exhausted as there is No Demand for higher prices immediately following the breakout.
- This is a bullish validation, as the low volume pullbacks show that sellers are not present in the markup.
- This represents a 'Shakeout' of weak shorts that will lead to a high-volume continuation candle.
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