As such, contract prices are closely tied to supply and demand. Effect, or price activity, might be divided into two basic market classifications. A trending market is one in which the forces of supply and demand are moving from a state of balance thru a state of imbalance. A consolidating market is moving from a state of imbalance thru a state of balance or equilibrium. To the interactions of the two forces of supply and demand, we might add a third force, one which is constantly interacting with the other two.
Resistance acts as a neutralizing force to the combined effect of supply and demand.
A market that is trending upward or downward will usually react or consolidate near or at major resistance. A major consolidation in the form of a top or bottom is usually formed at an important resistance level. Price tends to vibrate or oscillate near resistance or sometimes will stop rather abrubtly at resistance and change trend. 5 year subscription to Working Money. Free book selection.