medium · Volume Spread Analysis effort-vs-result-spread
A practitioner identifies a 'Two-Bar Reversal' at a potential market bottom. Bar 1 is a wide-spread down-bar on ultra-high volume. Bar 2 is a wide-spread up-bar that closes above the high of Bar 1.
What is the micro-lecture explanation for why this is bullish?
- The high volume in Bar 1 was actually professional absorption 'hidden' by the downward move, which is confirmed when Bar 2 recovers the entire range.
- Bar 1 created a rare 'Mushroom Top' pattern in reverse, and Bar 2 is the classic 'Sign of Strength' that confirms this fresh breakout move.
- It indicates that the 'Path of Least Resistance' has decisively shifted from sideways to down, marking Bar 2 as nothing more than a fleeting 'Trap Up-move.'
- The ultra-high volume seen on Bar 1 attracted eager retail buyers who were then completely 'trapped' and quickly stopped out by the sharp reversal move in Bar 2.
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