medium · Volume Spread Analysis climaxes-tests-springs-upthrusts
A stock breaks out of a 3-month accumulation base at $42.00. Two days later, it pulls back to $42.10 on volume that is 40% of the average. It then closes at $42.50 (on the high).
What does this 'Test of Breakout' confirm?
- The mark-up has failed because the low volume shows there is 'No Demand' for the stock at higher prices.
- It is a 'Failed Test,' suggesting that the breakout was a 'Trap Up-Move' and the price will soon collapse.
- It confirms that the old resistance has successfully become support and that supply is absent at the breakout level.
- The professionals are 'Churning' the price at the highs to distribute their remaining shares before the markdown.
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