Glad to hear you are enjoying the thread.
The trend is sort of what is in the background....it depends just where the last strength or weakness has occured.
The background of the chart, really refers to the most important recent climactic action, which is now influencing the chart.
So if , for instance, price has been in a long term uptrend, and has then seen price gap up with a wide spread on very high volume, then price only moves sideways in a range for a period. This is likely to have been a climactic event, followed by a distribution zone......so once price has actually confirmed a breakdown from the sideways trading range and started a down trend, there is considered to be weakness in the background of the chart. This weakness will influence the chart as it pushes lower in a new downtrend. So if a sign of potential strength is seen (a spring or potential test ), and the expectation is for a rise in price, you can usually discount the strength of the expected rise, as there is weakness in the background, and it will usually thwart any decent rise in price (because sellers will come in). However, when signs of potential weakness are seen (like up thrusts, breakdowns and no demand bars), and there is weakness in the background, you can expect them to respond nicely to the downside, and push lower with ease.
Whereas, when there is potential strength in the background, the opposite and mirror image takes place (long positions have been taken by the professionals, price is now in an uptrend, and the positions held are being defended. eg- when selling pressure arrives, the supply is absorbed and price does not breakdown), then when signs of strength are seen, you can expect them to respond strongly and rise with ease.
Generally, once price is being defended in a certain direction (because the professional money, holds positions), if it is in an uptrend, there is usually strength in the background (pros are long and /or demand is strong), and if it is in a downtrend, there is usually weakness in the background (pros sure either short, or not interested, and the retailers are selling to each other, because price is weak).
Does that make sense ??
Cheers
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