Comments on: Finding an Edge with Support and Resistance

By: Jerry

Jerry — Thu, 28 Jul 2011 08:41:37 +0000

I agree support & resistance is the creme of the crop. I use the Whyckoff method for trading ranges & VSA for trends. I have found indicators work best if we use then to test what we see in a chart. For example in most cases the MACD will cross over from buying in the market such as a breakout, we use that as a set up as the market is over bought then as the MACD has it’s second cross, that would be our trigger as long as we see higher lows in momentum, as long as we can locate enough buying in the market that supports the market it’s all good. For those that live on indicators, I suggest use them to test prior market movement on what you see in the chart. If a MACD crosses & we look to the left of the chart & we can not locate any buying then sure enough this would be a false breakout because buying of the professionals must support market moves if we are to expect higher prices. I prefer to use channels & trend lines then moving averages however I find moving averages useful for scanning to filter out bad apples from good ones. For swing trading I suggest use the MACD histogram for over bought & over sold areas.. this works well as momentum increases from a pivot low. For momentum trades I suggest buying any down bar in a trend, as long as your trending up & you missed the breakout, you can catch the wave on any down bar as long as the market tries to fall on low volume & can’t make the grade. I generally mark any areas of high volume, these would be important areas of support & resistance where there is buying & selling, where professionals are active in the market either selling there holdings into the buying or buying into the selling supporting the market. If we want a more automatic way of trading, indicators can be used but like I said, they are best suited to test prior market movements such as a williams gives a buy signal, we test that as it swings high to over bought then fall & as it falls we wait for it to hold above it’s prior over sold giving a false swing indicating the market is to strong to reach over sold suggesting the market is ready to mark up. I find this best suited for those wish to bypass false signals & trade on stronger ones by testing cross overs & what the market what to & is able to do. Plotting support & resistance lines as suggested in this article is good strategy for planning however remember true support & resistance or areas of buying & selling that influences the market carries higher volume activity & these areas must be considered important in the future. This article suggested price clusters in areas of support & resistance.. how true but keep in mind when price clusters, this could be buying before a mark up. When price clusters, something is holding up the market to make no real progress on activity. These areas should not be traded but instead should be tested as price breaks out then falls back down where prior resistance becomes support producing a low risk entry. Break outs are great as a trend starts it’s move but in the middle of a channel any breakout should be tested before entry by buying into the next dip otherwise we risk buying into professionals unloading there holdings in what they considered to be a weak market. I find breakout best for areas of accumulation where dips are best suited for when a trend is under way where there is higher lows. If we buy every breakout, we will eventually lose the game therefore breakouts when risk factor is low at areas closer to the bottom in the mark up & dips, pull backs, back ups are best when risk factor is higher near the top of the channel or to extended from it’s 50 day moving average.

Hope this helps the newbies!!!

By: Winston

Winston — Tue, 16 Mar 2010 04:31:53 +0000

how 2 access ur blog in d post entitled “the old 1-2-3″

By: andy

andy — Tue, 02 Feb 2010 16:12:13 +0000

Karen:

Thanks but I have not received the chart you sent.
I did send you my email, so hopefully you can resend it to me.

Thank you!
Andy

By: Karen

Karen — Tue, 02 Feb 2010 15:10:49 +0000

You’re looking for a candle that breaks the trend line in the opposite direction. Hope that helps!

By: Karen

Karen — Tue, 02 Feb 2010 15:08:04 +0000

The stocks I’m currently trading are: AAPL, AMZN, GLD, WLT.

If you keep an eye on the blog I usually publish a watch list when conditions are starting to come together and new trades are on the horizon.

By: Bobby

Bobby — Mon, 01 Feb 2010 19:38:09 +0000

Hi Karen,

Thanks for your reply. I have another quick question for you. You mentioned once the trend line is pierced by a candle of opposite color then draw the S / R line across its base. By pierce do you mean a candle that closes above/below the trendline? or just an interesection the trendline is good enough?

Thanks again.
Bobby

By: Jerry

Jerry — Mon, 01 Feb 2010 16:50:11 +0000

Karen,

I’ve passed this blog on to a few others like myself who are novices but have really tuned in over the last year and one half and now feel ready to enter the market and hopefully the markets are giving us an entry opportunity. My question: do you have any trades going on right now in the market? And if you do can you tell us what symbol so we can examine it with the tools you have given us.

Thank you

By: Karen

Karen — Mon, 01 Feb 2010 16:01:44 +0000

Andy, I don’t think you’re missing anything — I can send you a chart — I’ve left the trend lines so you can see where the break occurs and the resistance line drawn.

I can’t attach a chart, but would be willing to send it if you have an email address for me . . .

By: Karen

Karen — Mon, 01 Feb 2010 15:56:43 +0000

Hi Bobby,

Yes, this techniques works on any market and on any time frame.

No, the candles don’t need to be all up candles or all down candles to draw a trend line.

I ignore the wicks only in the drawing of the trend lines.

I’ve found that the bodies more accurately reflect the median area of support and resistance. Since the wicks reflect the high and low they really are not as representative of where support and resistance may be found, but reflect a margin of error that one should consider when looking at support and resistance lines.

Thanks for the question!

By: Karen

Karen — Mon, 01 Feb 2010 15:50:03 +0000

Hi Andy,

I sent you a chart along with a reply . . . let me know if you don’t see it . . . hope it helps.

Karen