medium · Volume Spread Analysis climaxes-tests-springs-upthrusts
If a market produces a 'Shake-out' on bad news, but then fails to move higher within the next 2 to 3 bars, how should the practitioner adjust their thesis?
- The shake-out was successful, and the sideways move is simply a 'test' of the professionals' resolve before the anticipated big markup begins.
- The market is simply 're-accumulating' after the shake-out, and the practitioner should hold the position as long as the shake-out low is not breached on volume.
- The bad news alone was not significant enough to cause a genuine reversal, so the practitioner should simply wait for even worse news before buying.
- This is a 'negative response to a positive signal,' indicating that the background weakness is more dominant than the apparent strength of the shake-out.
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