medium · Volume Spread Analysis wyckoff-phases-schematics
Imagine a market situation where a 'test' pattern (down during the bar, close on the high, low volume) appears in a clear downtrend with no prior signs of accumulation. The market fails to rise over the next three bars.
Why is this 'negative response' considered a potential shorting opportunity?
- It suggests that the low volume was actually 'smart money' selling in small blocks.
- The failure of the test indicates that the market-makers are about to gap the price up.
- Tests in a downtrend are always markers of hidden supply swamping the market.
- The lack of response confirms that professional interest in buying is non-existent.
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