This is a reactive method to identify . Unlike proactive methods such as and moving averages which are based on current price action to predict future price movements.
Reactive methods provide meaningful interpretation to price level where the market has already visited.
Basic suggested a is a price level which will support a price on its way down and a will resist price on its way up.
Therefore, one can conclude that a price level near the bottom of the profile which heavily favors the buy side in terms of is a good indication of a . The opposite is also true. A price level near the top of the profile which heavily favors sell side is a good indication of a .