hard · Volume Spread Analysis climaxes-tests-springs-upthrusts
A stock breaks support on Bar 1 with a wide spread and high volume, closing on the low. Bar 2 recovers immediately, closing back inside the range on a wide spread and high volume. Bar 3 is a narrow-spread bar that dips into the range of Bar 1 and closes near the high on very low volume.
How does this sequence resolve the ambiguity of Bar 1?
- The sequence reveals Bar 1 was a high-volume shakeout, confirmed by the absorption on Bar 2 and the lack of supply on Bar 3.
- The sequence indicates a redistribution phase, since Bar 1 showed genuine, sustained institutional selling pressure.
- The market is in pure equilibrium and requires a second selling climax to fully clear the residual volume left from Bar 1.
- Bar 3 is actually a sign of no demand, which suggests that the two-bar reversal formed by Bar 1 and Bar 2 has now failed outright.
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