easy · Volume Spread Analysis climaxes-tests-springs-upthrusts
A stock has been trading in a sideways range for two months. Suddenly, the price dips below the established support level on very low volume and then quickly recovers to close back inside the range near its high.
What is the most likely purpose of this move?
- To allow market-makers to sell their remaining holdings at a better price.
- To test the upside potential by seeing if buyers will chase the price higher.
- To trigger stop-loss orders and 'flush out' the final weak holders.
- To signal a genuine breakdown and the start of a major bear move.
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