Do support and resistance work on indices?

B

Blitzjoker

I can imagine the concepts of support and resistance might work for individual stocks, or maybe for Forex. This is because I can imagine traders trading in these things by for example, value investing when prices fall above a certain level, or profit taking when they climb to a certain level.

However, I wonder if this is the case with indices, as they are more removed from the underlying asset being bought and sold. Do traders really buy and sell at these levels for similar reasons?

Does anyone here have any thoughts on this?
 
Blitzjoker said:
I can imagine the concepts of support and resistance might work for individual stocks, or maybe for Forex. This is because I can imagine traders trading in these things by for example, value investing when prices fall above a certain level, or profit taking when they climb to a certain level.

However, I wonder if this is the case with indices, as they are more removed from the underlying asset being bought and sold. Do traders really buy and sell at these levels for similar reasons?

Does anyone here have any thoughts on this?
More...

It is absolutely true that R/S levels "manifest" on indices. They tend to work in small bands, but are affected by macro events, rather than the micro events that impact individual stocks. JUN NQ is a good example. It's current res band is around the 13700 level. It's been trying to poke above it for the past few trading days, but keeps bouncing down from it.
 
Overnight said:
It is absolutely true that R/S levels "manifest" on indices. They tend to work in small bands, but are affected by macro events, rather than the micro events that impact individual stocks. JUN NQ is a good example. It's current res band is around the 13700 level. It's been trying to poke above it for the past few trading days, but keeps bouncing down from it.
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Yupp. Aside from traders believing they are important causing a self fulfilling prophecy, there is also options dealer hedging activity causing price to behave differently around certain levels.
 

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Blitzjoker said:
as they are more removed from the underlying asset being bought and sold.
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are they?

indices reflect a basket of stocks so the support and resistances of index should reflect the S/R of the basket of stocks.

you might expect it to be a bit vaguer .......perhaps
 
Overnight said:
It is absolutely true that R/S levels "manifest" on indices. They tend to work in small bands, but are affected by macro events, rather than the micro events that impact individual stocks. JUN NQ is a good example. It's current res band is around the 13700 level. It's been trying to poke above it for the past few trading days, but keeps bouncing down from it.
More...
a big seller there.
i remember a stock in India that refuse to go below 130.25 INR ..every time it touched that price it went up.....it touched that price about 25 times in two months and each time went up.

a big buy order at that rate....and it would have got bigger and bigger as market participants realised a floor was there...an example of a self fulfilling prophesy
 
padutrader said:
a big seller there.
i remember a stock in India that refuse to go below 130.25 INR ...
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This thread is about indices, not individual stocks. So by your calculation, when GME, that one lone stock, shot up 2000% in a week, the entire index should have followed. And when it dropped back to reality, the index should have crashed.

No. Indices are detached from individual stocks, dude. We know what you are "trying" to say, but you are exceedingly bad at expressing it.
 
Blitzjoker said:
I can imagine the concepts of support and resistance might work for individual stocks, or maybe for Forex. This is because I can imagine traders trading in these things by for example, value investing when prices fall above a certain level, or profit taking when they climb to a certain level.

However, I wonder if this is the case with indices, as they are more removed from the underlying asset being bought and sold. Do traders really buy and sell at these levels for similar reasons?

Does anyone here have any thoughts on this?
More...

This is something you can very easily test on your own.

wrbtrader
 
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