Education · Stage 7 · 07
Absorption
A great deal of aggression arrives, and price does not move. Somebody is taking the other side of all of it, on purpose, and is not in a hurry. The playbook this site is built on calls it a door that will not budge, which is exactly what it looks like.
Mak · 3 min read · Stage 7, article 7 of 9
The mechanism
Everything needed for this was established two stages ago. Aggressive orders consume passive ones; when the passive side at a price runs out, price moves to the next level.
Absorption is what happens when the passive side does not run out. Aggressive buyers keep lifting the offer, and the offer keeps being there — refilled, again and again, by somebody willing to keep selling at that price.
So the signature is a combination that should look strange on a chart and does not: high volume, high delta, and almost no price movement.
Why the move often goes the other way
This is the part the playbook explains well and most sources skip.
Everyone who bought aggressively into that level now owns a position at a price that did not go anywhere. From the stage on buying and selling: a position is an obligation to trade in the opposite direction later. If price begins to slip, those buyers have to sell to get out.
So the sharp move away from an absorption level frequently comes from the people who were just buying, not from new sellers arriving. That is a mechanical explanation, it requires no story about institutions, and it is the same trapped-orders machinery behind the liquidity sweep from the chart patterns article.
Where you can see it
Three windows, three views of one event — which is the whole argument of this stage.
| Window | What it looks like |
|---|---|
| The tape | A stream of aggressive prints on one side, with the last price barely changing. The article on the tape ended on exactly this. |
| The footprint | Heavy volume piled at the extreme of the bar, on the aggressive side, and the bar failing to close beyond it. |
| The book | Size at one price being consumed and reappearing, repeatedly. Consumed and refilled is absorption; disappearing without trades is not. |
That last distinction is worth reading twice, because it is where the article on the order book pays off. Refilled after being traded is somebody defending a price with money. Vanishing untouched is somebody who was never going to trade. They look similar on a ladder and mean opposite things.
And the limits
Three, and none of them is usually printed next to the word.
- A level that absorbs can still break. Whoever is defending it has a limit too. Absorption tells you somebody sizeable is there; it does not tell you they will win.
- You see it a few seconds late. «Volume arrived and price did not move» is only knowable once the price has had time not to move.
- It needs real data. Every window above depends on per-trade information and on the at-bid / at-ask inference. On an aggregated feed, absorption is invisible or imaginary.
What absorption is, then, is evidence about who is present at a price. That is genuinely valuable and it is smaller than the promise usually attached to it — which is the same sentence this path has been repeating since the first stage, about every instrument in turn.