In day 2, the market closed lower than on day 1 but the day 3 close was higher than day 2. By examining the high-low lines, we see a somewhat different story about the trading activity on each day. Both day 2 and day 3 had consecutively lower highs and lower lows. This formation is part of a downward trend and even though the price on day 3 closed higher than on day 2, a chart analyst would conclude that because the bars were trending lower, the market must be on a downward trend. Weekends are not shown on a bar chart and on weekdays when the exchange is closed, the day's space is left blank.
Technical analysis interprets the predictive meaning of zigs and zags on charts.
Technical analysis does not worry about the fundamental reason that could cause a zig to become a zag. The technical analyst accepts that the market itself will be the first news of some major weather scare or new buying pressure. The common explanation is that charts work because traders make them work. If an uptrend breaks, chartist rush to sell. The resulting downtrend confirms the old rule to sell when an uptrend breaks.