Supply Zone

A supply zone is the base or the candle from which price fell sharply. The idea, common in price-action trading, is that sellers who did not get filled, or who defended that origin, may sell again when price returns. It is a forward use of an old high area. Resistance is the observed stall. Supply is a theory about why the stall might happen at the origin of a drop.

Find a strong down move. Mark the small consolidation or the last up candle before the drop. That box is the zone. The move away should be impulsive. A slow drift away does not leave the same footprint.

A close through the zone, especially on the first test, says the supply was absorbed. The zone can then flip to demand. Do not short a zone that has already failed.

The first return to a fresh supply zone is the textbook short, with risk above the zone. "Fresh" means price has not already traded through it and chopped. Each revisit can consume the orders the theory assumes are there.

Marking a supply zone on every red candle. Without an impulsive departure, there is no footprint, only a candle.

The order-block story is a model. You cannot see the resting sells. Trade the reaction and the invalidation, not the story that institutions are certainly waiting there.