That refers to- (for instance) a chart where there has been a serious supply event that may well have been distribution from below, as opposed to supply coming in from the left.
Which leaves a chart with potential weakness in the background, and may have begun (or is already in) a downtrend.
So once the distribution is complete, and short positions have been set.
This chart will then have a negative influence over the future trading, this is because the professional traders who had been supporting the price, buying the dips, absorbing the supply and generally holding the market up to protect their (long) position, do not have to do this anymore.
In fact, if they have also set short positions up now (why wouldn't you...), they would like to see supply coming in, and would regularly add to the supply (through further repeated shorting and covering), and would not be likely to offer any decent support to the share price much at all.......
So in this environment, on a chart with a negative influence over it, a certain bias needs to be given to bars which show weakness, and also the confirmation bars of weakness (upthrusts and no demand).
And opposing that, when signs of potential strength come in on the chart, like tests and shakeouts etc, their strength needs to be discounted, and may only provide a weak shallow bounce, or even just fail completely........
So on a chart with strong selling in the immediate background, and/or is in a downtrend, you offer a bias to the weak bars, and discount the strength of potentially strong bars
And the mirror image is true for a chart with potentially strong buying or strength in the immediate background, and/or is in an up trend, you offer some bias to any potentially strong bars, and discount the strength of potentially weak bars.
does that make sense......
cheer
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