medium · Volume Price Analysis wyckoff-laws
A commodity trades in a narrow range for several months. A news event causes a massive spike on ultra-high volume, but the price immediately returns to the range.
What does the Law of Cause and Effect suggest about the subsequent breakout?
- The 'Cause' was not yet fully built and the spike was a climax event or trap.
- The 'Effect' is now doubled because the spike added more energy to the cause.
- The spike represents the entire 'Effect' of the months of consolidation.
- The 'Cause' is now invalidated and no move will ever happen.
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