medium · Volume Spread Analysis supply-demand-smart-money
A stock is trending down in a channel. It approaches the lower support line on a wide spread with volume that is lower than the previous bar and the 20-day average. The bar closes on the low. This is followed by a narrow-spread up-bar on average volume.
What is the diagnosis?
- Professional buying has fully absorbed the available supply right at this key trend line level.
- Falling pressure followed by a pause; the decline is losing momentum but no reversal signal is present.
- A successful test of the support line has occurred, indicating an immediate and fully confirmed trend reversal.
- A 'shake-out' that has now decisively flushed out the very last of the remaining weak, undercapitalized holders.
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