I just heard a radio news report that said very confidently that prices are down on the New York Stock Exchange due to investors’ cashing in on profits from recent gains.
How can they be so sure that a drop in the market is due to “profit-taking” and not some other cause?
A good clue is if they see a high trading volume, especially among stocks that have had increases in recent days. This would indicate that people who owned shares of those stocks are selling them.
“Profit-taking” is just a term where the current price and sales volume are higher than recent past and the price then declines.
Whether the sellers have made a profit or whether their sales is the primary cause of the day’s decline is assumption.