Testing is one of the key tools that the insiders use, in all markets.

Like
everything
else in VPA, it is a simple concept, based on simple logic, and once we
understand
the concept of accumulation and the structure on the chart, we will begin to
see tests
occurring in all time frames and in all markets. It is one of the most powerful
signals
you will see, as it is the insiders sending a clear message that the market is
about to
break out and move higher.
In the example in Fig 5.13 the insiders were testing for any residual selling
pressure,
often referred to as 'supply', following the accumulation phase. With a full
warehouse they were all set to roll out the campaign and the last step was to
check
that all the selling in the price levels immediately ahead had all been
absorbed. In
this case it hadn’t! However, once the test has been repeated and confirmed
with low
volume, the market will move higher.
Testing Demand
But what of the reverse scenario, where we are coming to the end of a
distribution
phase. The last thing the insiders want is to start a campaign to begin filling
their
warehouses again, move back into an area which has seen high demand
(buying
pressure) only for the buyers to take the market in the opposite direction.
Once again a test is employed to make sure that all the buying (demand)
pressure
has been absorbed in the distribution phase, and this is done with a test of
demand as
the campaign gets under way.
In this case the distribution campaign has been in progress for some time.
The
insiders have moved the market from the wholesale price level, to their target
level
for retail prices, and are now happily selling on waves of bullish news. The
investors
and speculators are rushing in and buying, fearing that they are missing out
on a
golden opportunity, and motivated by greed beted by . The insiders pull in
more
demand by whip sawing the prices and gradually emptying their warehouses
of all
the inventory of stock.
Finally, when the campaign is complete, it's time to start the next phase of
moving
the market lower, and as the trend starts to develop, the price action moves
back into
areas which only recently had seen high volume buying. Once again a test is
required, this time to test demand. If the demand is low, then all the buying
has been
absorbed in the distribution phase as we can see in the schematic in Fig. 5.14