medium · Volume Spread Analysis effort-vs-result-spread
An index produces a wide-spread down-bar that closes near its high on volume that is 2.5× the 20-period average. The next two bars are narrow-range up-bars on very low volume.
What does this 'negative response' suggest about the initial down-bar?
- The low volume on the up-bars confirms the shakeout is successful.
- The initial bar was likely genuine selling because professional buying failed to produce a recovery.
- The market is resting before the inevitable markup starts.
- The ultra-high volume on the down-bar guaranteed a bottom was formed.
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