Support and Resistance: Video 19 A, B, C, D & E Flashcards
Define Support
A price below the market where buyers might be stronger than sellers.
Define Resistance
A price level that resists rallies. When the market goes to a certain price and sells off.
Support and Resistance are also called _______________. Why?
Inflection Points
Because when price gets to a support or resistance level, it can either Breakout or Reverse. The market is making a decision whether to reverse or resume.
In a trend, __% of the time a strong bear trend will not stop at support (and a bull trend will not stop at resistance.
80%
Because the market has inertia.
All trend reversals take place at support and resistance, like a measured move or trend line.
Types of Support and Resistance
Moving Average is Support and Resistance
Trend Lines
Trend Channel Lines
Prior Highs and Lows
measured Move Projections
Round Numbers
Any type of support and resistance can be the most important on the chart. It depends on context and strength of the S/R
This one is a little tricky, but….
Step 1: Find 2 points to draw a channel line on top
Step 2: Draw a parallel line below to see if computers are paying attention
Not sure I understand this well, but on Slide 14 of Video 19B
Wedges rarely loo good, but enter on reversals from lines, if context is good.
Slide 15 Video 19B. Need to understand this more.
The market is always paying attention to prior highs and lows, the result is…..
You get a lot of double tops and bottoms. Most are not exact, a lot or little above and below.
Traders are looking for breakout tests all of the time. Traders will often see if there is a rally back to the breakout point. Breakout test.
At the end of the month, the market often pays attention too….
Monthly support and resistance.
At the end of the week, the appearance of the weekly chart is determined by support and resistance on the …
Weekly Chart. Especially the final hour of the day.
On the previous months, what are most important?
The open, close, high and low of last month and current month
Traders will watch how the 5-minute chart reacts to support and resistance
When trading the last day of the month, look for any nearby…
Support and Resistance
True or false: Trading Ranges are Support and Resistance
TRUE
Use 20 bar EMA and Support and Resistance
A breakout above a double top with three pushes is a type of _______
Wedge
In the photo it was a also a Gap Bar
When you’re in a bear trend, the first time the market does anything opposite, you have to assume the reversal will fail.
Round numbers are important for Support or Resistance
Institutions sell a lot of options, so they want them to expire worthless. People buy options at round numbers. and put stops at round numbers
A round number is good for taking profits, or placing a stop.
Once a stock gets reaches 90, it often cannot escape the magnet pull of 100. See slide
Popular Moving Averages for Daily chart are 50, 100, 150 and 200.
You never know which MA will make an impact, but watch price action near it.
More Support and Resistances are:
Trend Lines
Prior Highs and Lows
Measured Move Projections
MA’s on any time frame
More in the photo….
In strong Bull Trends, “Buy the Close Bulls” do what?
Buy strong bull closes, betting that they are a sign of higher prices, even if there is a pullback first.
The highest close of a bull trend, the becomes resistance and leads to a leg down in the new Trading Range. Why?
Because the bulls that bought that the high of the trend will sell out breakeven, and that adds to the selling pressure
In a bear trend, if the pullback is disappointing (if the Buying Pressure is too strong), what do the bears assume?
Their sell the close bear trend has ended and the market is either entering a trading range or a bear flag. in either case, they are not expecting lower prices for the time being.
True or False: Buy Entry Bar and Signal Bars lows are areas of support
True
Whenever there are two resistance levels, the market often gets above one without reaching the other.
If it does, it might be a Trading Range.
See Photo: 19E
50% is the single most important pullback level
In a strong rally like this, bulls will place orders to buy at 50% pullback. Betting that the bear reversal will fail and bull trend will resume.
The bull trend continues only it continues to make higher lows.
Al starts the 50% at the tail bottom of a bar.
Bulls buy with limit orders at 50%.
The start of the biggest bear bar after 20 bars in a bear trend, the Top of the Sell Climax late in bear trend is resistance (Magnet)
Chances are the market is going to close the gap. Chances are price will go a little bit above the sell climax bar. Top of las Major High, late in bear trend is resistance
Complete List of Support and Resistance
Some of these he says he doesn’t use, like Band, Fibs (except 50%), Daily pivots
At some point you get a break below the bull trend line. The first reversal down in strong bull trend is probably minor. So then market enters a trading range or a bear flag, not a bull trend. So traders buying the close are confident that the market will get back to the high. And will buy more lower down (since trading range breakouts fail and reverse). In a trading range, you want to buy low. So this increases chances that the market will not continue up above the high since bulls are selling out.
You can use the breakout bar as bull/bear breakout bar as support/resistance.
I don’t understand this, but good to refer to:
Al is saying that support is always a magnet. Here, the bear tried to sell below the bear bar. But it failed, so they bought higher. Price came back to the bear bar, and they can sell breakeven.
(Not sure how this works, because whenever I try to wait for price to come back down to my entry, it keeps going higher instead)
Here again, but in this case he’s saying, “The short worked at this price once, so I’ll short again. (I don’t think he’s saying hold until price comes all the way back your entry, then sell again).
The bottom of an entry bar and the bottom of a signal bar are both support.
The Highest Close of a Bull Trend is Resistance
50% is the most important pullback number after a bull leg. From bottom to top of leg, but 50% can be a close and not include tail. Bulls beat that the bear reversal will fail and the bull trend will resume. Because it dips just below 50%, traders with limit orders usually get filled.
Also, the traders who didn’t get filled, will buy the close higher and add to the buying pressure.
Al calls near the red cursor a Minor Trend Reversal. The next below it is a major trend Reversal.
50% Pullback after a bear leg is resistance.
So here they wait for a second entry sell. But who know how they know to wait. Al says it creates a wedge top on the third push up. Maybe after two pushes, you wait for a third for a wedge. Top of bear trend is stop.
It continues to be a bear trend only if it makes lower highs.
Major Trend Reversals lead to a strong sell-off to a new low. So going above it could be a bear flag or a bull leg in a trading range.
The top of the Sell Climax late in bear trend is resistance (magnet).
Top of last major Lower high, late in bear trend, is resistance.
Usually can’t prevent rally from going above at least top of climax, and maybe even Measured Move up.
The bottom of a buy Climax late in a bull trend is support.
It’s a magnet. Market usually gets drawn to it. Market dips a little bit below and you usually get a bounce.
(Where cursor is)
Once selloff falls below bottom of Buy Climax, or last bull leg, the bull trend is over. Now either trading range or bear trend. Often leads to a Measured Move down (from top to bottom of the buy climax)
