hard · Volume Profile Analysis trading-strategies
Yesterday closed leaving a naked (untested) POC at $50.20. Today opens at $50.80 and trends lower, reaching $50.25 by mid-session on declining volume into the approach. A trader fading the move expects a bounce off the naked POC.
What is the subtlest reason the FILL of the naked POC, rather than a bounce in front of it, can still validate the underlying thesis?
- A naked POC, once touched, is permanently neutralized, so any reaction after the touch is coincidental and should not be traded
- The thesis is that the naked POC acts as a magnet; the prior fair-value level being filled is the completion of that magnet, and the responsive bounce is expected at the touch, not before it
- Declining volume into the level guarantees the bounce will occur exactly two ticks above the POC as liquidity dries up
- The naked POC only matters if price gaps to it; a gradual trend into the level removes its significance entirely
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