hard · Volume Spread Analysis effort-vs-result-spread
A stock has rallied for five straight days. On the fifth day the spread is the widest of the rally and the close sits at the top of the range on volume roughly in line with the four days before it. On the sixth day the spread is barely a third as wide, the close sits only slightly higher than the fifth day's close, yet volume is the highest recorded in the entire five-month uptrend.
Read together, what do these two days most likely mark?
- Continuation confirmed, since record volume on an up day always validates further strength in the prevailing trend
- A no-demand bar, because the sixth day's narrow spread alone proves buyers have simply stepped aside for now
- Distribution beginning, as the heaviest volume of the advance produces almost no further gain after such strength
- A spring, since the sudden volume spike shows large operators testing the market before the very next leg higher
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