medium · Volume Spread Analysis background-trend-context
An institutional trader observes: Bar 1: Wide spread down, high volume, close on the high. Bar 2: Narrow spread down, volume lower than the prior two bars, close in the middle. Bar 3: Wide spread up, volume higher than Bar 2, close on the high.
If the practitioner wants to verify 'Bag Holding,' what external evidence would they look for alongside this sequence?
- The company releases a positive earnings report that coincides with Bar 3.
- The stock's spread is 3.0 × the average of the last 20 bars.
- The stock refuses to fall or falls significantly less than its parent index during the index's down-move.
- The stock has the highest transaction volume in its sector over the last 90 minutes.
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