medium · Volume Spread Analysis background-trend-context
A practitioner is using 'Relative Strength' analysis to select a stock for a long position. Index: Declines 4% over 5 days on high volume. Stock X: Declines 0.5% over 5 days on low volume. Stock Y: Declines 6% over 5 days on ultra-high volume.
Following a 'Selling Climax' in the index, which stock is the prime candidate and why?
- Stock X, because it shows 'Relative Strength' and professional accumulation (resisting the decline).
- Stock Y, because its larger percentage drop offers more 'Value' for the recovery.
- Stock Y, because the ultra-high volume indicates it has also reached its own 'Selling Climax'.
- Both stocks, as they will both bounce once the index bottoms out.
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