What Is Preliminary Support?
Preliminary Support is the first notable attempt by buyers to halt a decline. Volume rises and the spread widens, but the rally is short-lived and the downtrend resumes. It is the opening act of Phase A.
How to Identify It
On its own it is unreliable because many bounces look the same. Its value is in context: it often precedes the Selling Climax.
- An increase in volume after a prolonged decline.
- Bars with long lower shadows or closes off the lows.
- A bounce that fails to change the trend.
What To Do
Treat PS as a cue to watch more closely. Avoid buying it. Wait for the climax and the test that follows. Mark the area, since it often becomes support during the range.