TAKE NOTE OF THE BOLD IN THIS STATEMENT . THIS IS WHAT I THINK MAY HAVE HAPPENED ON THE ES FRIDAY
A shake-out is hallmarked by a wide spread down, which then reverses to close on the highs, accompanied
by high volume. This dramatic manoeuvre is usually carried out on ‘bad news‘. This is a moneymaking
move to catch stops. Those who are long in the market are forced to cover. Those traders who were
thinking bullish are now fearful to enter the market. Those who shorted the market will be forced to buy
back later. For the market to close on, or near, the highs, shows that the professional money is covering
short positions (buying), and absorbing the panic sellers who are being shaken-out by the drastic fall in
price. If the professional money had refused to do this, it is unlikely that the price would close on the
highs, with high volume. Shake-outs occur when the market has been bullish – however, residual supply
will be present, which has caused problems by making the market sluggish, stopping higher prices. As the
professional operators are bullish, they have to remove the latent supply, so they shake the market out on
bad news, which then allows for higher prices.
A shake-out is hallmarked by a wide spread down, which then reverses to close on the highs, accompanied
by high volume. This dramatic manoeuvre is usually carried out on ‘bad news‘. This is a moneymaking
move to catch stops. Those who are long in the market are forced to cover. Those traders who were
thinking bullish are now fearful to enter the market. Those who shorted the market will be forced to buy
back later. For the market to close on, or near, the highs, shows that the professional money is covering
short positions (buying), and absorbing the panic sellers who are being shaken-out by the drastic fall in
price. If the professional money had refused to do this, it is unlikely that the price would close on the
highs, with high volume. Shake-outs occur when the market has been bullish – however, residual supply
will be present, which has caused problems by making the market sluggish, stopping higher prices. As the
professional operators are bullish, they have to remove the latent supply, so they shake the market out on
bad news, which then allows for higher prices.
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