medium · Volume Spread Analysis climaxes-tests-springs-upthrusts
A market has been in a steady decline for three weeks. You observe a bar with an ultra-wide spread down, record-breaking volume, and a close in the lower third of the range. The following bar is a narrow-spread up-bar on very low volume.
How should a professional practitioner interpret this sequence regarding the potential for a Selling Climax?
- This is a successful 'Secondary Test' of the previous week's lows, confirming support and signaling the start of a fresh Mark-Up phase.
- The sequence confirms a genuine Selling Climax, since the ultra-high record-breaking volume indicates the final capitulation of weak, panicked holders.
- The ultra-high volume on a low close followed by no demand indicates that supply is still swamping the market and the decline is likely to continue.
- The sequence represents a classic 'Bag Holding' scenario in which professional operators are absorbing available supply at these severely depressed lows.
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