Rally, Base & Drop Support and Resistance

Rally-Base-Drop is a supply-and-demand framework for locating zones where price is likely to react. The 'base' is a short consolidation, a cluster of small candles where the market paused, and the theory is that this pause is where larger participants quietly accumulated or distributed before the next move. The zone is defined around that base rather than a single line.

The formation you see tells you what kind of zone it is. A Rally-Base-Drop pattern, price rising into a base then dropping away, marks a supply zone where selling emerged and price may sell off again on a return. A Drop-Base-Rally, price falling into a base then rallying, marks a demand zone where buying stepped in and price may bounce again when it revisits.

Not all zones are equal, and freshness matters. A zone that price has not yet returned to is considered fresh and generally carries more weight, because the resting interest there is presumed intact. Once price has tapped a zone one or more times, it is 'tested' and each retest tends to weaken it, since the orders that created the reaction get progressively consumed.