medium · Volume Spread Analysis background-trend-context
Background: An index is correcting downward. Stock A is falling significantly faster than the index. Stock B is trading sideways on very low volume.
Based on relative strength principles, which stock should a practitioner prioritize for a long position when the index turns?
- Stock A, because it is now deeply 'oversold' and should bounce the hardest.
- Neither; a practitioner should only ever buy stocks that are currently making fresh new highs.
- Stock B, because its resistance to the decline indicates professional accumulation.
- Both, since the index turning higher will lift every single stock in the market together.
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