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 happens to release a strongly positive earnings report that coincides with Bar 3.
- The stock's Bar-3 spread measures roughly 3.0 times the average spread of the preceding 20 bars.
- The stock refuses to fall or falls significantly less than its parent index during the index's down-move.
- The stock posts the single highest transaction volume across its entire sector over the last 90 trading minutes.
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