hard · Volume Spread Analysis supply-demand-smart-money
A stock in a mark-down phase rallies 5% over 3 bars on ultra-low volume. The fourth bar is a wide-spread down-bar on high volume that wipes out the entire 3-bar rally.
What does this tell you about the 'perceived value'?
- The low-volume rally cleared out the remaining sellers, and the 4th bar is a genuine 'test' of the lows.
- The 3-bar rally was actually a phase of re-accumulation, and the 4th bar is really nothing more than a 'shake-out'.
- The perceived value is declining; professionals used the low-volume rally to set up a 'smoke-filled room' trap.
- The professionals are simply 'bag holding' their mounting losses here, and the rally should resume again fairly shortly.
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