The Bears’ Power indicator shows the strength of the bears. If the indicator is below nought, the bears are strong; if it is above nought, they are weak. The indicator is based on two premises:
- The moving average of a price indicates where buyers and sellers agree
- The lowest price in a day is reached when selling pressures are strongest
Therefore, the difference between lowest price in a day and the moving average shows how strong the bears are; the bigger the gap, the more the bears brought down the price.