Page 69 - A Complete Guide to Volume Price Analysis: Read the book then read the market

Stoppdth="0">This is what the price action looks like as the brakes are applied by the insiders, and is generally referred to as stopping volume.
As I have said many times before, the market is like an oil tanker. It never reverses on a dime for many reasons, not least because just like a
supertanker it has momentum, and therefore takes time to respond, once the brakes are applied.

Fig 6.17 Stopping Volume

In Fig 6.17 we are in a strong down trend, the price waterfall has been in action and the market has been moving lower fast. However, the insiders
now want to start slowing the rate of descent, so start to move in and begin the buying process. This buying is then seen in subsequent candles with
deep lower wicks, but generally with relatively deep bodies. However, for additional strength in the signal, the close of the candle should be in the
upper half of the open and close price. This is not a hard and fast rule, but generally describes the candles as shown in Fig 6.17.

What is happening, is that the weight of the selling pressure has become so great at this point, that even the insiders moving into the market have
insufficient muscle to stop the market falling in one session. It takes two or three sessions for the brakes to be applied and is like our tanker. Switch
off the engines and the ship will continue for several miles. It's the same with the markets, particularly when you remember that markets fall faster
than they rise. In a market that is being driven by panic selling, the pressure is enormous.

The insiders move in and manage to absorb some of this pressure with prices recovering in the session, to close well off the lows of session
thereby creating the deep lower wick. The selling then continues into the next session, and the insiders come in again with higher volumes, driving
the price back higher off the lows, and perhaps with a narrower body on the candle, signalling that the buying is now starting to absorb the selling to
a greater extent. Next, we see another candle with a narrower body and a deep wick. Finally, we see our first hammer candle.

The sequence of candles in Fig 6.17 is an almost perfect example, and if we do see this combination following a sharp move lower, then we would
be on full alert for the forthcoming move higher.

Stopping volume is exactly that. It is the volume of the insiders and professional money coming into the market and stopping it falling further. It is a
great signal of impending strength, and a potential reversal in the bearish trend to a bullish trend. It is the precursor to the buying climax which
should follow as the last remnants of selling pressure are mopped up, the warehouses are filled to over flowing, and the insiders are ready to go.
You should be to!!

Topping Out Volume