Charting Support and Resistance
This is one of the most basic and fundamental skills you will have to learn when looking at charts. When a stock is being bought and reaches a point that it cannot go any further it creates a peak which is called Resistance. The farthest sellers can drive down a stock before buyers take back over creates support, take a look:
How can Support and Resistance help us?
By itself it doesn’t say very much but when you start to create lines from resistance to resistance and from support to support you start to see the bigger picture:
There are supports and resistances that will often carry over a long period of time. These are called ‘Key level’ of supports and resistances. These are the ones we want to find and use to our advantage. Another thing to take note of in the chart above is that once you break through a support level, it will often become resistance for the next stretch. The same is true for breaking through a resistance, it too will often become support. This will help you if your strategy is to buy at support levels because you can map these into the future. It’s also important to note, these levels can also be diagonal and not always horizontal.
Breakdown and Breakout
When a stock passes through a support it’s called a Breakdown and when it passes up through a resistance it’s called a Breakout. Once this happens investors take notice. A breakdown will often trigger sellers to sell more and a breakout will cause buyers to buy more.
If this article has helped you at all share it or
consider donating so that we can continue to expand this project.
And don’t forget to get this book so you can begin trading like a pro:
Thank you for visiting www.wealthyagain.org