As you evaluate a trading range, you must keep an opened mind and allow the evidence to present itself. We are working on the balance of probabilities, and are attempting to use a basket of principles to help us identify specific areas where we can closely examine The Law of Supply and Demand, The Law of Cause and Effect and The Law of Effort VS Result. It is by examining these laws that we are able to detect the behavior of the stock and the motives of those who are dominant in it.

A Sign of Weakness can occur anywhere in the price action of a stock. An upthrust, a Number One Spring and a Fall through the Ice, are all Signs of Weakness because they make a statement. A statement can be what a stock does, or, just as importantly, what it is unable to do.

Here, however, we are talking about a general Sign of Weakness that occurs within a range of distribution. As you examine a trading range, the early parts of the range may be difficult to analyze. As the trading range continues to build, you should start to see clues as to whether the trading range is that of accumulation or that of distribution. Just because you have had an up move doesn't necessarily mean that the trading range that follows is automatically going to be distribution. It must prove itself to be that.

One of the ways it proves itself is by having a Sign of Weakness within the trading range. A Sign of Weakness is a reaction within the trading range that stands out from all the other reactions. It is a deep reaction, with widening price spread and greater volume, indicating increased price weakness. It is evidence of heavy selling, and as such, should make a significant low in relation to the previous trading range price action (it does not have to be the lowest low in the trading range).

This Sign of Weakness is the action, it is only a possibility. It must be proven with a test. The test for the Sign of Weakness is the Last Point of Supply.

The Last Point of Supply is the rally that follows the Sign of Weakness. It is not so important as to how far this rally moves, as it is in how it moves. (See Last Point of Supply).