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When price approaches support on increasing volume and wide spread down bars, why doesn't this mean that demand is coming in? After all, professional money stands for high volume right? |
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Because if you are in an uptrend and price is approaching the Demand (support) Line, you should be seeing a recession of volume and narrowing price spread - this is what is normal in an uptrend. It might be helpful if you think in terms of Effort vs Result. In bullish moves, volume (i.e., effort) expands to the upside and retracts to the downside and you should see price (i.e., result) act accordingly. This means you should see with wider spreads and expanding volume as price advances (indicates demand) and narrowing spreads and lower volume as price reacts (indicates lack of supply). When you see price approach the Demand Line with increasing volume and wider spread, it means supply is swamping demand and the support has very good odds of breaking, as it did yesterday.
Background is critial, too. Yesterday saw a Buying Climax where price was overbought (at J) after more than 3 hours of trending, No Demand (at K) after the climax, and a "mushrooming" or crowning over at the top - all of these indicated the market was likely to react and all preceeded the breaking of the Demand line.
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I'm seen selling climaxes occur on support a lot, and in most of these cases they happened after a couple of WRB formed. |
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That seems normal, too. Reactions will often end in a selling climax of some degree of intensity at support, especially support on a higher time frame, which is a good place to look for climactic action. This may seem contradictory with the above, but it is about position in the trend and degree of intensity of the stopping volume. The background and context are vital, and we don't have that information in this discussion, so it seems vague. Post some charts about this and then everyone on this thread can help with some answers and benefit from the analysis.
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And, I've also found the opposite to be true. When volume is relatively low and price bars are small, the chances seem higher for price to break support |
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I'd like to see what you are referring to, here, so again, please post some charts. We will all be able to learn that way
Eiger