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 really a 'Shake-out', since it happened right after a low-volume 'Test' had already probed and held the support line firmly.
- The high volume seen on this trend line breakdown bar is actually 'Absorption Volume', so the underlying uptrend structure remains fully intact right now.
- 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 simply another instance of 'No Demand' wearing a clever disguise, since price never once managed to rally higher on the next bar that followed.
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