Absorption: The Hidden Reversal Signal
AbsorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow. is what happens when aggressive orders hit a level but price does not move. Imagine 500 market sell orders hitting the bid at 18200, but the price stays at 18200. That means there are 500 or more resting buy limit orders absorbing the selling pressure.
On the footprint chartDefinitionA chart showing bid and ask volume at every price inside each candle. Reveals who is buying and selling., absorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow. looks like heavy volume on one side with no corresponding price movement. This is one of the most powerful signals because it tells you that a large passive participant is absorbing all the aggression at that level.
Two types of absorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow.:
- Bullish AbsorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow. — heavy bid volume (aggressive selling) at a support level, but price does not break lower. Limit buy orders are absorbing every sell order
- Bearish AbsorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow. — heavy ask volume (aggressive buying) at a resistance level, but price does not break higher. Limit sell orders are absorbing every buy order
Key Insight
AbsorptionDefinitionHeavy aggressive orders hit a level but price doesn't move — a large passive player is absorbing the flow. is invisible on a candlestick chart. You might see a small-bodied candle with wicks — but you would never know that thousands of contracts were absorbed at that level. The footprint shows you exactly what happened.
Finished and Unfinished Business
An unfinished auction occurs when the high or low of a footprint bar has zero volume on one side. For example, if the high of the bar shows "0 x 45" — there were 45 aggressive buyers at the high but zero sellers. The auction is unfinished because sellers never showed up to challenge the buyers.
Unfinished business acts as a magnet for price. The market tends to revisit unfinished auctions to complete the two-sided trading process. Mark these levels on your chart — price often returns to them within the session.
Key Insight
Unfinished business at the high or low of a bar is an incomplete auction. Price tends to return to finish it. Use these levels as targets or as areas to watch for continuation or reversal.