The Psychological Line (PSY) is based on the presumption that people will resist paying more for a share than others, unless of course the share continues to move up. Conversely, people resist selling a share for less than the price others have been getting for it, except if the price continues to decline. Finally, people who purchase the stock at the top of a trading range will tend to wait until the price comes back before they get out.
A PSY is based on the number of time intervals the market was up during the preceding period and is displayed as a percentage. For example: A chart with the PSY with a period of 12 will have the data point for each day representing the percentage of days the market was up during the preceding 12 days. If the market was up for six of the 12 days, and down for the other six, it would be represented on the line as 50 per cent.