Hi Auto That's a good question. And the answer is that is not...

Hi Auto

That's a good question. And the answer is that is not the assumption. The assumption is that any given volume that is "trapped" for a period of time because the price has fallen since acquisition will be divided into 2 categories:

1. that proportion which is no longer satisfied with their entry decision and keen to exit for breakeven when the price returns to that level, and

2. that proportion which remains satisfied with their investment thesis and happy to remain on board in anticipation of the prospect of a profitable return

So when I look at a chart and for example see 10M volume traded at 23c 2 months ago and price drops and not returns to 23c, that there is up to 10M of latent supply, i.e. I don't  expect all of it to become supply because some of that volume falls  into category to - the problem of course is I can't know what the split will be. As a general rule of thumb (i.e. this is not precise) my observations (and probably logic) says that the longer the time that volume has been "trapped" at lower prices, and/or the lower the price has travelled before returning to that entry price, the higher the proportion of that volume will "feel trapped" by a wrong investment decision and want to exit at breakeven.

So in the above example then the 10M figure is a ceiling figure - and I would expect resistance to cave to demand some time before 10M of demand effort has been expended (whether on one or several successive attempts - its cumulative). Another useful perspective to have in this type of analysis is that if demand effort clearly exceeds that 10M figure,  then you can start to conclude their is some other factor at play putting a lid on price,  maybe simply a lack of demand (because there is no news driving demand), deliberate accumulation, or a change in sector trend that results in a shift in investor sentiment, etc.

Hope the above helps.

Cheers, Sharks.