Supply and Demand

Before price can make an impulsive move in one direction, it usually spends time resting somewhere first, a stretch of chop where buyers and sellers are roughly matched, and that resting spot is what a supply or demand zone marks. It’s a close cousin of the order block, covering the same underlying idea, but drawn around the whole base rather than a single candle. What the zone represents A demand zone: the ranging base before an impulsive rally. A supply zone is the same idea before an impulsive decline. ...

A zone doesn’t have to stay what it was. A supply zone that finally gives way, that price pushes cleanly through instead of turning at, doesn’t just disappear off the chart, it often flips and starts acting as demand the next time price returns to it. The reverse is just as common, an old demand zone that breaks becomes resistance on the retest. This role reversal is one of the more useful things to watch for once you’ve got the basic zones down. ...