Price Location
Supply Zone
A price area where sellers overwhelmed buyers, causing a sharp move down
A supply zone forms when there is a volume imbalance in favor of sellers. It is identified by finding the last bullish (buy) candle before a sharp, impulsive move to the downside. The zone is drawn from the high to the low of that pivot candle. When price returns to the supply zone, sellers are expected to re-enter, pushing price lower again. Supply zones at the extreme of a structural range are the strongest.
✓How to Recognize
- •Sharp move up followed by an impulsive move down
- •Last buy candle before the impulsive move down is the pivot
- •Zone drawn from high to low of the pivot candle (including wicks)
- •Strong volume candles departing the zone confirm institutional interest
⚡How to Avoid
- →Drawing zones where there is no clear impulsive move away
- →Using zones that have already been tested and broken
- →Ignoring the difference between extreme and decisional zones
- →Expecting every supply zone to hold without confluence