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 offers deeper 'Value' after its bigger percentage drop, making it the stronger recovery candidate.
- Stock Y, because the ultra-high volume shows it has already reached its own separate 'Selling Climax' bottom.
- Both stocks will likely bounce together once the parent index finally puts in its bottom.
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