medium · Volume Spread Analysis effort-vs-result-spread
A 'Two-Bar Reversal' (Bullish) is characterized by a wide-spread down-bar on high volume followed immediately by a wide-spread up-bar on high volume that closes above the first bar's high.
Why is this considered strong?
- The two bars cancel each other out, leaving the net volume near zero for the period and making the signal meaningless.
- It indicates a 'failed upthrust' that has now trapped all of the short sellers who entered positions on that first bar.
- The second bar confirms that the massive volume in the first bar was actually 'hidden' professional buying rather than selling.
- The heavy volume recorded on both bars merely creates a 'neutral zone' where the market will most likely drift sideways for several weeks.
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