hard · Volume Spread Analysis
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 'Mushroom Top' in reverse, and Bar 2 is the 'Sign of Strength' that marks the breakout.
- It indicates that the 'Path of Least Resistance' has shifted from sideways to down, making Bar 2 a 'Trap Up-move.'
- The ultra-high volume on Bar 1 attracted retail buyers who were then 'trapped' by the move in Bar 2.
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