Spotting Rally-Base-Rally (RBR) and Drop-Base-Drop (DBD) zones can be quite straightforward once you know what to look for.
Start by identifying trends, or rallies and drops in the market.
An upward trend, or rally, is a period of sustained price increase, while a downward trend, or drop, is a period of sustained price decrease.
Look for relatively strong movements in the price chart that suggest a trend.
Now, in between these trends, you’ll often find periods of consolidation or sideways movement. These are your “bases”. These are periods where the price seems to ‘pause’, fluctuating within a relatively tight range before the next significant move.
In a Rally-Base-Rally (RBR) pattern, you’ll see a rally (upward movement), followed by a base (consolidation), and then another rally. This indicates a demand zone. Buyers stepped in during the consolidation period, driving the price upward again.
On the flip side, for a Drop-Base-Drop (DBD) pattern, you’ll see a drop (downward movement), followed by a base, and then another drop.
This is considered a supply zone.
Sellers took control during the consolidation, causing the price to drop further.
The trick here is to ensure you’re not mistaking a minor pause in price movement for a legitimate base. Look for periods of consolidation that have a clear start and end, with the price moving decidedly higher or lower afterwards.
Remember: The goal is to find areas where there was a clear shift in power between buyers and sellers – these are the zones where major players might step in again in the future.