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What is Overhead Supply? |
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What is Overhead Supply?
A critically important concept to learn is analyzing price
movement is the principle of overhead supply. Overhead supply is
when there are areas of price resistance in a stock as it moves
up after experiencing a downtrend. These areas of resistance
represent prior purchases of stock and serve to limit and
frustrate a stock's upward movement because the investors who
made these purchases are motivated to |
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sell when the price
returns to their entry point. So it is normal that a number of
traders who are already in "red" will sell when they see a
chance to get their money back. Good chartists know how to
recognize the price areas that represent heavy areas of overhead
supply.
They will never make the fatal mistake of buying a stock that
has a large recent amount of overhead supply. However, a stock
that's able to fight its way through |
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its overhead supply may be
safer to buy, even though the price is a little higher.
Supply areas more than two years old create less resistance.
Visit: two leading stock picking services
http://stockadvisorgroup.com and http://stockpicksguaranteed.com
for stock picks and more trading tips.
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