A reverse upthrust usually occurs during a selling climax, here is some information on how to spot one.
A selling climax is indicated by ultra-wide spreads down, with exceptionally high volume, usually closing on or near the highs of the day. Add more bullishness if the news is bad! PROFESSIONAL SUPPORT (OR REVERSE UP-THRUST)
This action is very similar to a selling climax but is less intense – the reverse up-thrust can be thought of as a mini 'Selling Climax’. There will still be a wide spread down-day, often driving down into recent or new low ground, and then closing at or near the highs, on high volume. Note, this indicator is more reliable when the day is gapped down and the following day is gapped up – add more bullishness if the news is bad. Any down-day on low volume (no selling) after this event, especially if it closes on the high of the day, is a strong indication of market strength.
This professional buying (absorption of the supply) will usually stop the down-move. The more liquid the market, the more buying will be required to stop the down-move. The four major currencies are good examples of liquid markets. Here substantial volume is usually required over several days to stop a downmove.
Without accumulation, every rally is doomed to failure. Without distribution, every down-move is also doomed to failure. Every move is directly linked to the amount of shares that have changed hands, which creates an imbalance of supply and demand, tipping the move one way or the other.
Up-thrusts are moneymaking traps that are designed to catch stops – they usually represent signs of weakness. If you have a distribution area directly behind you (to the left of your chart), and you see an upthrust, this becomes a very strong indication of weakness. A sharp move down the next day (bar) will confirm the weakness.
Why have up-thrusts? In any market, there will be stop-loss orders above the price action. As traders collectively think the same way, these stops will be within a close price band above the market. If professional operators have an opportunity to
trigger your stops, by marking prices up with little cost to themselves, they will most definitely do it!
