hard · Volume Spread Analysis background-trend-context
A practitioner observes an index that has been falling for several weeks. On Tuesday, a bar appears with a wide spread down and ultra-high volume, closing in the middle of its range. On Wednesday, the market produces a narrow spread up-bar on very low volume. Thursday's bar closes lower than Tuesday's low.
What does the 'negative response' on Thursday reveal about Tuesday's high volume?
- The lack of upward response and subsequent break of the low confirms that Tuesday's volume was genuine selling rather than stopping volume.
- Thursday's move is instead a classic 'spring,' engineered to catch the very last remaining sellers before a major reversal begins.
- Tuesday's volume was in fact a selling climax that successfully cleared out all the remaining weak holders left in the market by then.
- Wednesday's thin volume on an up-bar was simply 'no demand,' confirming that professionals were buying aggressively throughout Tuesday's session.
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