Bull therapy 101-thread for technical analysis with the fundamentals

Thank you for sharing such queries that makes all of us to revise what we learnt once in a while.

Please refer the book’s Chap 4 – Volume Price Analysis – First Principles, Pg 69 , Fig 4.13

Quoting some excerpts from the text :

we can see a narrow spread candle with high volume which, is an anomaly.

There is only one conclusion we can draw.
The market is starting to look weak, and is typical of a candle pattern that starts to develop at the top of a bullish trend, or the bottom of a bearish trend.

With the narrow spread candle and the high volume, the question we might reasonably ask, is ‘who is actually selling here?

The specialists have driven prices higher, but the market is now struggling at this level.
They are selling to the market to clear their warehouse, but the buyers are not there in sufficient numbers to move the price higher, as it is constantly knocked back by longer term traders, selling out and taking their profits off the table.

They maintain the price at the current level attracting more buyers in, who are hoping to jump into the trend and take some easy profits, but the sellers keep selling, preventing any real rise in price.

In this case, the stock went into consolidation once that anomaly candle appeared and was a good sign to get out.
The stock consolidated for the next 3 months and gave a breakout on Nov 8th, exactly above the high of the anomaly candle on a high volume.
You will also notice that this is also the point when 10 EMA went above the 20 EMA.

Again all this is in hindsight, I am also learning. VPA experts like Karthik Marar would have usually drawn a parallel line to the high and low of such anomaly candle and waited for the price to breakout of either of the line to take a decision.