Kardec Trader explains how to spot absorption using order-flow cues at support and resistance. When aggressive buyers hit the ask but fail to push price higher, it signals a likely pullback. Heavy selling that doesn't move price lower suggests passive buyers absorbing and a bounce upward.
Let's say we see the market rally up and now we're coming into our level of resistance, and we see a lot of aggressive buying volume come in here. Thousands of contracts, thousands hitting the market, taking liquidity away and hitting every single passive seller. These are aggressive buyers buying on the ask to passive sellers who are selling on the ask. Tons of buying volume comes in, but the market does not move anywhere. This is a very good indication of absorption, and the market would then be forced to pull back as well. And as we come into the level of support, there's tons of selling volume here, but the market cannot sell off. In fact, there's even more selling volume here at the level of support than there was. That dropped the market severely to the downside. Now we have more volume here than we did when the market dropped, but the market is not going down. This is a very good indication that somebody is buying here passively and absorbing all the selling volume. And it's good to follow their footsteps and look for a possible bounce to the upside.
