Practical use of Support and Resistance

Chuck Krug

Chuck Krug

Let's establish what support and resistance are:

support is when enough buyers see the price as low so, they buy
resistance is when enough people perceive the price as high, so they sell.

<img src=http://elitetrader.com/vb/attachment.php?s=&postid=2218033>
 

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so since we missed the 830ish long entry, next play would be to short at 860 area. Feel free to chime in everyone :-).
IMO stop should be always wide when trading S and R.
but how wide?
 
Most started watching the march contract yesterday.

You'll get different opinions on the subject.

To me, where the market bounced/stopped (in this case) going down or started consolidating is where there WAS sufficient demand to at least temporarily stop prices from declining.

When coming from a lower high, as in this case, I like to see price action that indicates there is still pent up demand. A successful test of the level, preferably a higher low. Or a modest quick minor lower low (head fake/2B) then rapid acceleration up.

I'm not sure just blindly buying a previous low in a downtrend will work out often enough to make up for the losses incurred when it just keeps going down to find a lower level of "support"/demand. Which could also be a temporary relative lack of new sellers as much as new buyers.
 

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Quote from Lucrum:

Most started watching the march contract yesterday.

You'll get different opinions on the subject.

To me, where the market bounced/stopped (in this case) going down or started consolidating is where there WAS sufficient demand to at least temporarily stop prices from declining.

When coming from a lower high, as in this case, I like to see price action that indicates there is still pent up demand. A successful test of the level, preferably a higher low. Or a modest quick minor lower low (head fake/2B) then rapid acceleration up.

I'm not sure just blindly buying a previous low in a downtrend will work out often enough to make up for the losses incurred when it just keeps going down to find a lower level of "support"/demand. Which could also be a temporary relative lack of new sellers as much as new buyers.
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yes, good post. but imo a failure of support and resistance is also a way to use S and R.
 
Quote from Chuck Krug:

yes, good post. but imo a failure of support and resistance is also a way to use S and R.
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Once it's actually failed, I agree.
 
Quote from Chuck Krug:

Let's establish what support and resistance are:

support is when enough buyers see the price as low so, they buy
resistance is when enough people perceive the price as high, so they sell.

<img src=http://elitetrader.com/vb/attachment.php?s=&postid=2218033>
More...

Here is a different view of your data and a continuation through current.
 

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