Strength & weakness

Let’s examine these two principles more closely using Dogecoin – a cryptocurrency as the illustration. You should know that these two principles apply to all markets over all time frames.

Strength & weakness personified – note that supply appears at the top of the market and demand appears at the bottom of the market as demonstrated by the supply line in red and the demand line in green. Once the price range becomes excessive relative to the previous bars in the background, you are alerted to a potential change in trend.

Do you know when the market is weak or strong? Or better yet, how to tell when any market is ready to fall or rise.

Before selling or buying takes place, the market has to transit to a phase known and distribution, professional selling, or accumulation, professional buying. The accumulation phase is seen through the line formation expressed by channel lines CC. This channel line CC established the CAUSE that would later express itself through the EFFECT seen at bar A. The line formation is one of the biggest money-making formations known in classical traditional technical analysis. The professionals keep buying while keeping prices in a narrow range to potentially frustrate all the weak holders who were waiting for a quick advance. Once the accumulation phase is complete as seen above supply line C at point #1, the market is ready to be marked up until the buying climax phase; the strongest sign of weakness appears at letter A.

For those weak holders unaware of the CAUSE, they simply entered the market with euphoric ambitions expecting prices to rise above its 90-degree angle.

Understanding and knowing these two principles can and will save you headaches, sleepless nights, and potentially lots of money. So how can you tell when selling or buying has arrived? This post will guide you through the *principle of* *weakness* and *strength* so that you will know once and for all how to trade in harmony with professional interests. Once you see the principles unfold, you will never be able to not see them in the future.

As we begin, let’s define strength and weakness.

Definition: strength is buying. When strength, demand, or buying appears in the market, it will express itself via a wide spread down bar that closes off the low, in the middle, or high of the price bar. The next bar will be an up bar to confirm the buying that took place on the previous very wide-spread down bar. This will be akin to a FedEx letter coming your way with some important message requiring your immediate attention. Please stare at the chart for some time until the image stains your right brain.

Bar B is an excellent example of demand entering the market. Note how prices opened unchanged to the previous day’s close. They moved the price up, to trick you, after which prices were dropped to further panic investors into selling. Once all the weak holders sold, the indirect message was, “tricked you”, as prices were moved back up towards the day’s high. What a roller coaster. For confirmation, the next day’s price needs to close higher to confirming the buying that took place on bar B.

On the other hand, weakness is selling. When weakness, supply, or selling appears, it will express itself as a wide-spread up bar that closes off the high, in the middle, or low of the price bar.

For example, look at bar A on the chart. Bar A has the widest price up range ever seen in the chart’s background. The background is everything behind you - looking from right to left. The news must have been ultra-good to pull so many weak holders into the excitement of buying while the professionals, who control 80 – 90% of the market’s float are selling. The float is, i.e., the total number of contracts or shares available for trading. As the price moved away from its high, many weak holders continue to jump in; meanwhile, the professionals were telling you that they are ready to take prices lower. If you did not believe the message, observe how the next bar closed down. It is important to learn these, and all other principles, so you can respond within two seconds without doubting your understanding.

In short, the markets are a merchandising system designed to create losers unless market participants learn and understand the language including the principles and structures through which professionals operate to move prices up or down.