A trader must always remember that when price moves up, it is slow and steady. When it falls, it just falls off the cliff without a chute.
But why does it happen?
Big players take time to distribute and make money at highs. While they do so, they do not want retail traders to get a hint of it. Once their profit booking target is done, they use balance holding to suddenly correct the price for 2 reasons – do not let buyers exit with maximum profit and to not let sellers enter the trader.
This is exactly opposite to mark up phase in which price is taken up steadily because much volume is needed for price action.
It becomes, thus, obvious and quintessential for traders to know price points below which bears are expected to have taken control of the market. Here bears is being referred to big players who have already booked good price after mark up phase and might be looking for opportunity to commence mark down phase.
Price below red line is considered to be in control of bears. It may or may not result in sudden or sharp fall but it is worth locking your profits whenever probability of bears taking control goes up. This like also acts as stop loss line for buy side trades when price is above and as stop loss for short side trades when price is below decision making markings.
It acts as strong support for bullish market and as resistance for bearish market. Seasoned traders, take touch down to this marking as opportunity for pull back enteries.