hard · Volume Spread Analysis background-trend-context
An index has been in a sustained downtrend for months. It produces an ultra-wide spread down-bar on the highest volume seen in years, closing in the middle of the range. The following bar is a narrow-spread up-bar on low volume.
What is the most prudent course of action?
- Buy immediately on the close of the high-volume bar as the bottom is in
- Wait for a subsequent low-volume test of the high-volume area before entering
- Short the next rally because the low-volume up-bar shows 'no demand'
- Assume the high volume was professional selling and wait for lower prices
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