medium · Volume Spread Analysis background-trend-context
An index has been falling for two weeks. Today, a bar produces a wide spread down, ultra-high volume, and closes in the upper third of its range. The following bar opens flat and closes down on average volume.
What does this 'Negative Response' reveal?
- The move was a 'Shake-out' that successfully cleared all weak holders, as confirmed by the lower volume on the second bar.
- The index is in a 'Re-accumulation' phase and requires more time to build a cause.
- The initial high-volume buying was insufficient to arrest the supply, and the professionals who bought are now overwhelmed.
- The ultra-high volume on the first bar was 'Hidden Selling' disguised as stopping volume.
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