medium · Volume Price Analysis validation
A trader identifies a 'spring' pattern where the price dips below a support level. The candle that returns price back into the range is a narrow-spread down candle with volume 2 standard deviations below the mean.
What is the logic behind this bullish interpretation?
- The low volume proves that the insiders encountered no selling pressure below the floor, confirming a successful test.
- The lack of effort shows the support is fragile and will break on the next attempt made with high volume.
- The narrow spread on low volume marks a thin liquidity gap where price can accelerate freely without friction.
- The low volume suggests only retail traders are buying the dip, while insiders continue to sit on the sidelines watching.
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