Quote from Laissez Faire:
1199 was resistance this morning. It should now act as support. Sometimes respected to the tick level, other times being overshot and acting more as a zone. As simple as that.
Resistance turning to support works for two reasons. First, the actual psychology behind it is that people who sold the high which then became resistance are underwater, and want to get out at breakeven, so when it comes back they will buy. The other reason is that people know this and they trade accordingly, thus it becomes a self-fulfilling prophecy.
In this case, my plan to buy 96.50 was based on the cluster of volume from 96 to 98.50 which happened on the move up, with 96.50 being the POC of that distribution. However, the real volume came in on the 1 minute bar whose low is 97, and those buyers had not yet been tested. There was demand at that area previously, and in this case it needed to be tested. The fact that 99 failed does not negate the 15 point move up from the low from consolidation. The VAL and bulk of the volume of that move up was from 96 and up, thus a 1 point stop. As you can see from the profile, I guessed wrong that it would make it to 96.50, instead it stopped at 96.75.
99 could have failed, and as you said, it could have dropped further than it did. But it didn't, and that was the premise of my trade idea.
http://screencast.com/t/XIYsagiASPdk
