hard · Volume Spread Analysis background-trend-context
An index has been declining for three weeks. Today, a wide-spread down-bar appears on ultra-high volume, closing on the high of the bar. This is followed by three bars of narrow-range, sideways price action on average volume, which fail to produce any upward movement.
What does this 'negative response' suggest about the initial high-volume bar?
- The initial bar was stopping volume, but the lack of an immediate upward response indicates that supply remains high and the professionals are not yet ready to support a rally.
- The initial bar was actually a 'shake-out' in a strong background, and the sideways drift is 'no selling pressure' confirming the bottom is in.
- The initial bar was a selling climax, and the sideways movement represents the 're-accumulation' phase where the final supply is being absorbed.
- The ultra-high volume on the down-bar was actually professional selling, and the sideways bars are a 'test' that has already failed.
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