Monday, January 15, 2007 10:55:40 PM
Support and Resistance:
The subject of support and resistance is really a hard one to tackle in just one lesson, so perhaps we will do a part one and two. Also, see the lessons on MA's, as 'moving averages' are great places for a moving pps to stop or pause, and then either breakthru or reverse.
The main thing to remember about support and resistance is that "people are buying and selling the stock". Again charting is more about psychology than anything else. One of the reasons we call a point a "resistance point" is that it represents the place where people "stopped buying", historically.
If you bought CDE @ 5.50 on the last run and held, I would expect you to consider getting out when it climbs back to that level. In fact, there will be sellers all along the path northward from the bottom here at 4.20ish. The pause (base) @ around 5.05 will be the 1st test of resistance. Again, it is logical to assume that people thought it was going to bounce there, and either entered or perhaps added. Folks will get off the bus betweeen 5.00 and 5.50 making it hard to breakout above that level.
As noted on the chart, there are smaller areas of resistance along the way. They are too numerous to mark them all, but I chose one.
The 4.43 - 4.81 area is a good example. See how the pps bounced at 4.43, rose to 4.81, fell back and rose again, building a little base before breaking out above that level, and moving on up to around 5.25 (where it built another little base), before running on to 5.50?
Always expect support and resistance levels to do just that, i.e. offer resistance to a run and support to a correction.
The subject of support and resistance is really a hard one to tackle in just one lesson, so perhaps we will do a part one and two. Also, see the lessons on MA's, as 'moving averages' are great places for a moving pps to stop or pause, and then either breakthru or reverse.
The main thing to remember about support and resistance is that "people are buying and selling the stock". Again charting is more about psychology than anything else. One of the reasons we call a point a "resistance point" is that it represents the place where people "stopped buying", historically.
If you bought CDE @ 5.50 on the last run and held, I would expect you to consider getting out when it climbs back to that level. In fact, there will be sellers all along the path northward from the bottom here at 4.20ish. The pause (base) @ around 5.05 will be the 1st test of resistance. Again, it is logical to assume that people thought it was going to bounce there, and either entered or perhaps added. Folks will get off the bus betweeen 5.00 and 5.50 making it hard to breakout above that level.
As noted on the chart, there are smaller areas of resistance along the way. They are too numerous to mark them all, but I chose one.
The 4.43 - 4.81 area is a good example. See how the pps bounced at 4.43, rose to 4.81, fell back and rose again, building a little base before breaking out above that level, and moving on up to around 5.25 (where it built another little base), before running on to 5.50?
Always expect support and resistance levels to do just that, i.e. offer resistance to a run and support to a correction.
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