CHAPTER 4PRINCIPLES—SUPPLY/DEMANDAND SENTIMENT
The two basic principles of technical analysis are supply/demand and sentiment. Since these principles have specific definitions and parameters as applied to technical analysis, a brief discussion of each follows.
Supply/Demand
Investors have only one absolute number with which to work—price; that price is set every time there is a transaction between a willing buyer and a willing seller.
The numbers of sellers and buyers are never in equilibrium. Sometimes there are more buyers than sellers, and the price of the stock goes up. Rising prices create an optimistic or bull market in the stock. When there are more sellers than buyers, the price goes down. Falling prices create a pessimistic or bear market. ...
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