S/R

S

sulong

I decided to begin a journal on my thoughts and observations regarding support and resistance, and how I relate them to my trading.
The purpose's of me doing this are many, so I don't know if I can list them all, but the bottom line is to help me with my trading.

1. Focus
2. Clarity
3.commitment
4. Confidence
5. Using good form

I see s/r in a number of ways, prior Hi's/ lo's, floor pivots, and trend lines.
I'm working on incorporating channels into my analysis.

I've never kept a in depth journal before, on line or otherwise, so this is also a journey to better record keeping / journal writing.

Some basic thoughts on S/R lines.
These lines work like a magnet, they will attract the price, and they will also push price away.
The lines vary in thickness from one day to the next. Another way of putting it is the price ZONE around S/R varies.
 
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Neither R/S or Precious Stones are a science!
 
I was a little surprised today when nq did not test the 1515-18 area, or at least closer to ydl.
Although I should not have been.
I could see ym and es holding nicely above their prior days closing ranges,( no further down side movement ) while nq spent the morning and lunch hour stuck inside it's prior days closing range.
What this was telling me was it was 2 against 1 for more down side.

This afternoon was pretty interesting, all 3 ( nq, es, ym ) each hit Resistance at the same time, and each showed strength as they consolidated.
es, ym at new Hi's, nq lagging, but exceeded R at 1546-48
 
Assuming that you're focusing on the YM, ES, and NQ, also track the major indexes.

You'll note, for example, that the SOX was quite over-extended and began its correction last week. The RUT looks to be next (ditto the SML). This may account for the stomach upset that the Naz seems to be going thru.

The DJIA, NYA and SPX have all moved much slower and have not departed so far from their trendlines. Therefore, they may have quite a bit further to go. If they continue to show strength, the Naz may just continue its consolidation rather than correct all the way back to its trendline, at least for now.

All of which is another way of saying that when you're dealing with a large index, break it down into its components in order to see where the problems or potential problems lie. With the Naz, its the small caps, so keep an eye on their struggle.
 
Quote from dbphoenix:

Assuming that you're focusing on the YM, ES, and NQ, also track the major indexes.

You'll note, for example, that the SOX was quite over-extended and began its correction last week. The RUT looks to be next (ditto the SML). This may account for the stomach upset that the Naz seems to be going thru.

The DJIA, NYA and SPX have all moved much slower and have not departed so far from their trendlines. Therefore, they may have quite a bit further to go. If they continue to show strength, the Naz may just continue its consolidation rather than correct all the way back to its trendline, at least for now.

All of which is another way of saying that when you're dealing with a large index, break it down into its components in order to see where the problems or potential problems lie. With the Naz, its the small caps, so keep an eye on their struggle.
More...

Yes, I'm focusing on YM, ES, NQ, mostly NQ tho.

I spent some time last evening going through charts of the major indexes.
What some things I've notice are that most of them seemed to have accelerated their trends since about mid december, and are hanging around in the area of their upper channel lines.

Another thing is that, yesterday they printed full bodied candles on the lowest volume of the last 15 days. I'm not sure what to make of the seemingly low volume.

Thanks for the reply.

sulong
 
Yes, many are "hanging around" in the upper reaches. And they will have to return to their MAs eventually. They may do it, however, simply by consolidating (consolidation/pullback does not mean reversal).

As for the volume, I understand that the oomph yesterday was provided by buy programs, which would account for it. Now it remains to be seen whether that's all there was to it, or if there is genuine buying interest amongst the riff-raff. If there isn't, then we go right back down again (much the same dynamic as short-covering).
 
Now that I missed a good entry point, and sitting here watching, I thought I'd mention a few things about how price acts around pivot/ S/R levels.

I think it's important to wrap the possibilities of what can happen and what does happen around these levels into just a few scenarios, and then apply deductive reasoning to your scenarios.

If we start with the idea that when price reaches a s/r level it ought to do 1 of 3 things.
1. reverse off that level
2. pause and consolidate for a time, and then continue or reverse
3. blow right through

1 and 2 offer possibilities of action on my part, I've got no idea what to do about 3, (unless I'm already in).

1. To decide whether or not to look for a reversal at a certain level, we need more than just one indication that the level we have predetermined, is stronger than random. One way to do this is to look at the number of times that level has been touched on both sides of the line in the past.
That would make a previous hi/lo line.
Add to that a floor pivot line, and you've got 2 lines of strength for a reversal.
If you also have a multi day trend line in your s/r zone, the odds of a reversal are that much greater.
A confirmed reversal ought not take more than about 6 minutes, 3 minutes for a BE stop.
To me confirmed means More than 60% retracement of the immediate prior move.

To be continued
 
2. When the price consolidates, at a s/r level there's 3 things to consider, the strength of the line,how far the price pokes through the line before getting stopped, and the length of bars at, and before the line.

I've already mentioned some things about line strength.

A normal poke in the NQ line is about 4 ticks, some times 3 ticks.
When I see pokes like this, I'm comfortable with the thought that traders are using this line for profit taking.
once the price gets stopped at 4 ticks poke,then I need to watch how much of the previous move gets retraced.If there's a long range full bodied bar directly before a line touch, I use that bar as my gage, a percentage of that bars price being retraced, the more the price retraces that LRB, the less likely a continuation will happen.

Another thing I'll mention, is the importance of keeping an eye on the distance the price has already traveled, in relation to it's normal distance.( for profit taking considerations )
 
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