hard · Volume Spread Analysis
Why does a 'shakeout' often occur on bad news at the bottom of an accumulation range?
- The news provides the catalyst for emotional selling by weak holders, creating the liquidity the professional needs to complete his accumulation at low prices.
- The news confirms that the fundamental value has dropped, forcing the market-maker to adjust prices lower to attract new institutional buyers.
- The bad news creates 'no demand' at lower levels, ensuring that the market will remain in a bear phase for the foreseeable future.
- The professionals are surprised by the news and are forced to sell their holdings, creating the high volume seen on the shakeout bar.
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