hard · Volume Spread Analysis
During the mark-up phase following a spring, a stock experiences a price dip. The practitioner identifies a down-bar with a spread that is narrower than the previous bars and volume that is significantly lower than the average, closing on the highs.
How is this 'test in a rising market' used?
- It is a 'trap up-move' intended to lure in late buyers before a major upthrust occurs at the supply line.
- It provides a low-risk re-entry or add-to-position point, confirming that professional money is still supporting the trend and supply is not surfacing.
- It indicates that the buying momentum is fading, signaling that the practitioner should liquidate positions before a 'mushroom top' forms.
- It represents 'hidden selling,' where professionals are slowly offloading shares on the dips to avoid crashing the price prematurely.
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