Sometimes it is this simple. Demand and supply is the first and last law in the stock market.
The chart below is a stock that will remain a mystery. Members can see it in RTT WC blog.
A - Wide spread (High less low of the day)
B - Narrow spread.
The volume of 'A' and 'B' are the same, both are above average, Yet with 'B', price spread is narrow, so what is going on? During 'A' selling price pressure forced price down with ease, hence the wide spread. With 'B' the same volume could not force price down, thus the price level at 'B' was defended, selling was absorbed. The Wyckoff Law of Effort vs Results reminds that demand has overcome supply, and thus a bullish sign.
C - Wide spread
D - Narrow spread.
The volume for 'D' is much greater than 'C', and yes 'D' is like 'B', and 'D' shows more aggressive absorption, more determined buyers overcoming the sellers. This is bullish, the effort by the sellers has shown poor results to move price down, for the simple reason bulls has been able to defend the price level at 'D'. Add to this price is holding well at support.
Yes we have absorption at 'D', but we need more positive action to prove the demand has over come supply to see price rise substantially beyond 'D'.
"Thus, I affirm, every class of phenomena, whether in nature or in the stock market, must be subject to the universal law of causation and harmony. Every effect must have an adequate cause." ~ William D Gann
"October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February." ~ Mark Twain
NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net