medium · Volume Spread Analysis supply-demand-smart-money
In a downtrend, a wide-spread down-bar appears on ultra-high volume, but the closing price is in the upper third of the bar's range. The very next bar is an up-bar with average volume.
How should a practitioner interpret this sequence?
- Stopping volume has appeared, indicating that professional buying has absorbed the panic selling.
- Selling pressure is accelerating, as the ultra-high volume represents a fresh wave of professional shorting.
- A selling climax has occurred, and a new bull market is confirmed and should be traded immediately.
- A shake-out has occurred, meant to trap short sellers before the mark-down resumes.
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