medium · Volume Spread Analysis background-trend-context
A professional market-maker is bearish and sees large sell orders on the book. As retail buy orders come in during a rising market, the market-maker provides 'good' prices to the buyers. On a daily chart, this behavior manifests as:
- A wide spread on an up-day with increasing volume, which confirms a bullish trend.
- A gap-down at the open to shake out the existing sellers before absorbing their stock.
- Persistent support of daily lows (Bag Holding) to prevent the price from falling.
- A narrow spread on an up-day, often on high volume, which is a bearish signal.
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