There are several other "boxes" that could be drawn . It's convenient to draw the boxes after the fact once you know where price has gone. Beware.
Why Is The Obvious Not So Obvious?
- Thread starter nysestocks
- Start date
You do not draw boxes..they are just to help you see here what you can not currently see..I do not draw anything but horizontal lines when trading..in fact.. sometimes you are better off drawing absolutely nothing on your charts !!!!!
I noticed in the chart that you posted how you mentioned the various levels in the uptrend being respected in the downtrend. By this i imagine that you are regarding these levels as being support. If so, and if you are trading on the buy at support idea, you may, or may not, find the following posting I previously made in another thread of interest. The short of it is that IMHO there is no support in a downtrend that is anywhere equivalent to that in an uptrend, and can therefore not be expected to produce the same results. Any such so called support should be considered as being nothing more than just the previous low IMHO.
But excuse me if I misunderstood the intentions or meaning of your post.
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More than the question of working or not, the proper identification of support and resistance should be of greater concern. I have so often seen what IMHO I feel is one basic misinterpretation of support and resistance that would lead to failed or missed trades.
As in the attached, so many people refer to the lows in a downtrend, B, as support, such as S2, and the highs in an uptrend, A, such as R1, as resistance. The moves to S1 and S2 are completely opposite, with that to S2 being a move in the primary direction and that to S1 being a reaction. Therefore, the moves following S1 and S2 can not be expected perform equally. So for those who employ the 'buy at support and sell at resistance' tactic, treating both S1 and S2 as support will, as the OP questioned, be hit and miss. Also, for example, regarding R1 as resistance, rather than just the last high in the primary direction, may cause hesitation to buy before R1 is penetrated, resulting in a missed trade.
Additionally, using the white line as an example, looking for support at a low in the previous trend, S3, will not have a high probability of success as the forces at work at that price level are the opposite.
While the above is just basic TA, I've seen such misinterpretations so often that I thought I'd give my 2 cents, even though few will agree or be interested.
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