Lower highs formation on a chart, when connected by a descending trendline, indicates a bearish market structure where sellers dominate and buyers are unable to push prices to previous peak levels; each rally gets sold earlier, showing weak demand and strong supply. This trendline acts as a dynamic resistance, often leading to price rejection, and is commonly used for sell-on-rise strategies. The structure reflects negative market psychology and remains bearish until the price decisively breaks and sustains above the lower-high trendline, which may signal a possible trend change or consolidation.