If I observe prices in a strong downtrend, followed by a period of sideways movement before another decline, only to immediately return to the previous trading range, that's a buy signal.
Why? Because, during the sideways range, accumulation was taking place. The breakdown likely liquidated many long positions, and professional money will often buy in that area.
If
the price quickly returns to the range, it confirms that they’ve been
buying, and that's when I want to enter a long position in the market.
Quoted from:
Larry Williams (2016) - Buy Signal. (video)
Larry Williams (2016) - Buy Signal. (video)
See also: