medium · Volume Price Analysis validation
A trader observes a wide-spread bearish candle closing at its low on volume that is 50% below the recent average.
What is the VPA interpretation?
- The market is clearly oversold now, so an upside reversal is virtually guaranteed here.
- This is a successful test of demand, indicating that buying interest has already become exhausted.
- This is likely a 'trap down' move where market makers are testing for interest without participation.
- The move represents a genuine markdown phase, and the current downtrend will most likely continue lower.
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