hard · Volume Price Analysis Wyckoff's Laws & The Four Market Phases
A stock rallies four days in a row, closing higher each day, but each day's volume is lower than the last and each day's spread narrows. On the fifth day price gaps down sharply on the heaviest volume of the past three weeks.
Which principle best explains why the rally failed to sustain itself into the fifth-day reversal?
- The Law of Cause and Effect, since a four-day rally is too short a cause to ever produce a meaningful effect.
- The Law of Supply and Demand, since the rally was driven by thinning short-covering rather than genuine new demand.
- The Law of Effort and Result, since falling volume on each up day shows the advance lacked real demand behind it.
- The Composite Operator principle, since insiders always reverse a rally on exactly the fifth trading day.
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