Above figure is of wide spread candle with small wicks to

top and bottom, the associated volume is above average,

so the volume is validating the price action.
The above figure is of narrow spread candle with small
wicks on top and bottom. The associated volume is well
below average. The volume is validating the price action.
This is our first anomaly, we big result with less effort.
Afterall for wide spread candle we expect to see above
average volume bar, something is not right. If we were in
long market and this appeared. It is an early sign of trap.
The market opens and price are pushed higher to test in
interest of buyers and in above case price will be marked
lower with further price testing. The volume bar is
signalling that the market is not showing interest.
The above figure is clear signal of trap. The move higher is
not a genuine move but a fake move, made to suck traders
into weak positions and also take out stops, before
reversing sharply. It is narrow spread candle with high
volume. A small increase in price requires small volume
effort, but this not the case. This develops on top of bull
market and bottom of bear market. The buyers in long
market now start to take profits. As the positions are
closed out, more eager buyers come in to buy at top of
market, but price never rises as market operators
continue to liquidate their positions and take profit.
We have bullish trend developing in rising market with
rising price and rising volume. This gives us benchmark
history to refer future moves by volume bars.

Rising price=rising volume

The market is moving lower with rising volume. Market
operators are joining the market fall. Candle spread is
validated with volume bars
Above figure appears to be bullish trend with first candle
with narrow spread and bellow its average volume. The
second candle is slightly bigger candle than previous
candle, but with high volume. Something is wrong here.
The third candle then forms and closes as a wide spread
up candle, but with volume that is lower than previous
volume candle. As the spread of price candle is higher so
the volume should also be higher than previous volume
candle. The fourth candle forms and closes as very wide
price spread candle, but volume is even lower than
previous volume candle.

Candle 2: The market operators are selling over here first

move of insider.

Candle 3: The buying pressure is draining out, as volume

candles are also showing anomaly

Candle 4: We have falling volume in rising trend, alarm

bells ringing higher.
Price waterfall, where market sells sharply.

Candle 1: Normal small price spread and low volume

bellow its average.

Candle 2: Close marginally with price spread but volume is

high. This is signalling that the market is clearly resistant
to any move lower

Candle 3: Price spread is greater than previous candle but

the volume is low and less than previous volume. Selling
pressure is draining away.

Candle 4: Two anomalies confirming above two candle

anomalies.
This type of price action is essential to shake sellers out
the market
First the market breaks out from the end of the
accumulation phase, moving steadily higher, with average
volume. By building the bullish momentum slowly, as bulk
of distribution phase will be one at the top of the trend
and at the highest price possible.
At this stage, price generally moves into region where we
have seen heavy selling. Market operators execute a test
to gauge market reaction and check all the selling has
been absorbed in accumulation phase. If the volume
remains low it instantly tells that there are few sellers and
selling has been absorbed in the accumulation phase.
Test by marking price lower, this resulted in sellers
returning in large numbers and forcing price lower. Clearly
selling in accumulation phase has not been absorbed and
any further attempt to take market higher fails. The
insiders will have to take market lower and quickly. The
insiders take market back into congestion area.
The price action moves back to which only recently had
high volume buying. This time to test demand. If the
demand is low all the buying has been absorbed in
distribution phase.
Several tests are conducted to check demand after
distribution phase. If the price takes back to high buying
area and price rises with high volume then it is bad news
and insider will take price to congestion to start its
campaign again.
Selling Climax occurs during distribution phase. This last
hurrah before insider take market down. This gives in to
the fear of missing out and buy. This happens two or three
times on high volume with the market closing back at
open and at the end of distribution phase. The insiders are
selling into demand. Volume coupled with candlestick
which has a deep upper wick and narrow body. This is one
of the most powerful combination. The colour of body of
candle is unimportant. What is important is height of wick,
the repeated nature of this price action and the
associated high volume.
The buying climax is simply a selling climax reverse.
Towards the end of accumulation phase the insiders than
mark the prices down rapidly, flushing out more sellers,
before moving the price higher later in session to close
somewhere near the opening price.
The important point to remember here is that this cycle
could be in any time frame and in any market. The initial
phase of the distribution is executed purely from the
momentumalready driven into market by insiders, so the
volume here will be high but not exessive.
If these candles are simultaneous candles, each with
increasing volume. The market is going to fall because
those high has failed at exactly same level. Second we
have three shooting stars which are sign of weakness.
If these signals were to appear after a period of sideways
price action, then this gives signals even more strength as
we are validating technique of Support and Resistance. If
we had bullish trend developing and shooting star appears
with above average volume. This pattern has full attention
and if it is confirming weakness with some narrow spread
candles followed by another shooting star. If we are price
region where price had reversed previously, then it is
strong signal. The insiders selling back to the market
some of the inventory they have collected from panic
sellers who had bailed out earlier. The inventory has to be
sold as market moves lower. Some buyers will come in at
these pullbacks thinking the market has bottomed out.
This price action occurs all the time in a price waterfall as
markets move lower and fast. The volume will therefore
be above average or high, showing further weakness to
come.
A hammer is formed when in session the price has fallen,
only to reverse and recover to close back near the
opening price. Insiders move in to buy, supporting the
market temporarily. They may even push up with shooting
star candles. If this did not happen the insider would be
left with significant tranche of inventory bought at prices
and not at wholesale prices. A single hammer will not be
enough to stop the move lower even though the volume is
above average. The power of hammer candle is revealed
once we see two or three candles accompanied by high or
extremely high volume.
Volatile market require effort and we know effort and
result go hand in hand (wide price action). Clearly first
candle is an anomaly and logical answer is that price is
moved by the insiders, who are simply not joining in at the
moment. The most common reason for this is stop
hunting. They are not buying or selling themselves, but
simply ‘racking’ the price around. Long legged doji is seen
most often during fundamental news release. A long
legged doji candle, should always be validated by a
minimum of average volume, and preferably high or ultra
high. If it is low, then it is an anomaly and therefore trap
set by insiders.
If the volume is above average then expect to see that it
validates the price. The insiders are joining the move
higher. If the volume is low (below average), this is
warning signal. The price is being marked higher, but with
little effort.
A narrow-spread candle should have low volume (effort vs
result). If we see above average or high volume and
narrow spread candle. This should instantly alert us. If we
have up candle with narrow spread and relatively high
volume, then the market is showing some sign of
weakness. The market is resistant to higher price. The
next candle could be shooting star, which would confirm
this weakness further.

If we see high volume on down candle then the reverse

applies. This is first sign of potential reversal from bearish
to bullish. We would now wait for hammer, or long legged
doji to add further weight.
The hanging man appearing in a bullish trend is a sign of
strength and continuation of the trend. But it isn’t. It is in
fact the opposite and is sign of weakness, provided it is
associated with above average volume as shown. The
market has been moving steadily on rising volume, when
at some point in bullish trend, the market sells off sharply,
with price moving lower in session, only to recover and
close at, or near the high of the session. Creating the
familiar ‘hammer candle price action’ but here it is
hanging man candle. This is first sign of selling pressure in
market. This candle is sending signal that the market is
moving towards oversold area. The body of candle can be
of any colour. The hanging man is validated if it is
followed by shooting star in next few candles.
Insider want to slow the rate of descent, so to start to
move in and begin the buying process. This buying is seen
in subsequent candles with deep lower wick. Driving the
price wick higher off the lows, and perhaps with narrow
body on the candle, signalling that buying is now starting
to absorb the selling to great extent. It is the volume of
the insiders and professional money coming into the
market and stopping it fall further.
The shooting star. The distribution phase. The upper
wicks are deep and closing in lower half of candle. Volume
is above average.
These are the defining points of any congestion phase. To
qualify as a three bar candle/reversal the candle in centre
has to post a higher high and higher low, creating pivot
high pattern. The appearance of one pivot does not mean
that we are moving in congestion phase at this point. All
we can say is we have short term reversal in prospect.
Now we wait for equivalent isolated pivot low. Once this
candle appears we can draw two lines to define the
celling and the floor of our congestion zone.
Any break away from these areas require volume and lots
of volume. A breakout from such a price area on low
volume, is a classic trap move by operators and is often
referred to as a ‘fake out’.
If it is valid move, then the volume on initial break will be
well above average and rising. At this stage do not be
surprised to see the market to pull back to test ceiling as
it moves higher, but this should be accompanied with
rising volume.