medium · Volume Spread Analysis effort-vs-result-spread
A 'two-bar reversal' at a market top shows a wide up-bar on ultra-high volume followed by a wide down-bar closing below the first bar's low.
Why is the first bar's volume interpreted as bearish?
- The immediate downward result shows that the first bar's effort contained more selling than buying.
- Two-bar reversals are only valid on weekly charts and are treated as noise on daily charts.
- Retail traders were the ones buying the first bar, while professionals were buying the second bar instead.
- The ultra-high volume on the first bar indicates that the market has run out of fuel and cannot fall any further.
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