medium · Volume Spread Analysis effort-vs-result-spread
You see a 'Test' (down intraday, high close, low volume) at the support line of an uptrend channel. The price then breaks the trend line on the very next bar on wide spread and high volume.
What does this 'Negative Response' mean for the trend?
- The trend line break is a 'Shake-out' because it happened right after a 'Test'.
- The high volume on the breakdown is actually 'Absorption Volume' and the trend is still intact.
- The 'Test' failed to attract professional buying, and the high-volume breakdown confirms that the 'Path of Least Resistance' has shifted to the downside.
- The 'Test' was 'No Demand' because the price didn't go up afterward.
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