Overhead Supply

When a stock or index suffers a down move, it is said that the area to the left of current prices which is higher is an area of “overhead supply”. This is because we know that not all individuals on the way down were sellers. At all levels are buyers and sellers who are net long or short. As stocks move up back towards resistant areas we say that they have overhead supply because we know that bulls will be waiting to “get their money back” as the stock rises back to levels that they purchased at.