medium · Volume Spread Analysis supply-demand-smart-money
An index has been in a bear market for 6 months. It produces a wide-spread down-bar on the highest volume seen in years, closing mid-bar. The following week, the price trades in a narrow range on very low volume.
What is the practitioner's 'Checklist for Going Long' status?
- Short the next rally, since the record-breaking volume on this down-bar confirms extreme selling pressure that is likely still building.
- The background remains weak given the ongoing 6-month downtrend, and the low volume simply shows there is currently no demand for any meaningful rally at all.
- Immediate entry is now warranted, since 'stopping volume' has already been fully confirmed by the following narrow-range, low-volume bar seen this week.
- Strength is in the background (selling climax), and the low-volume week is a sign of 'no selling pressure'; prepare for entry on a successful test.
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