medium · Volume Spread Analysis wyckoff-phases-schematics
A stock that has been rising for weeks produces a bar with an ultra-wide spread and ultra-high volume, closing on the highs. The news is overwhelmingly positive.
Why does the KomFi framework suggest this might be the 'End of a Rising Market'?
- The good news will attract too many strong holders all at once, causing the market to become dangerously overcrowded before it eventually crashes lower.
- The close on the high is actually a trap here, because the price should instead have closed nearer the middle of the range to be a genuine markup bar.
- Excessive volume on an up-bar, especially on good news, often contains hidden selling as professionals use the euphoria to transfer their holdings.
- The wide spread shows that market-makers are marking the price up too fast to sustain, leading to an unhealthy overbought condition developing.
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