Select the account you'd like to open


Support & Resistance – Transforming A Chart

Support & Resistance – Transforming A Chart

From Craig Cobb at Trade with Precision:

Support and resistance is a flat level, a horizontal line. Boring I hear you say? Yep boring indeed but wow how it can transform my view on a chart! Something as simple as one horizontal line can take my view from yawn to WOHO! With the simple singular drawing of it.

OK so granted it’s not the sexiest, most amazingly visual and exciting piece of technical analysis but it works and as a trader I want things in my tool kit that work. Let me show you a chart where this simple horizontal line change everything!

20160211 twp1

The chart above is EURCHF, and it is a daily timeframe. Right now without any drawings on it, I see a move that has pulled back beyond the sell zone (10 & 20 period moving averages) and isn’t really of interest to me. Sure it is sitting on the 50 EMA but that isn’t in my trading rules and therefore I really am not that interested. I only use the MAs for trend and to highlight the dynamic zone of equilibrium (if you want to learn about this, check the website for the next instalment of the Advanced Education course where these subjects are covered in great detail). Now, let me draw in one simple horizontal line and show you how that shifts my thought process ...

20160211 twp2

One horizontal line drawn and this chart now transforms to a new level of interest for me. The candle that formed yesterday is now small, green and bullish. It is rejecting a level of old resistance which often when re-tested becomes support. So now there is a rejection of the support by yesterday’s candle. In my view if I see yesterday’s candle broken to the high side I am interested to look for long trades on the lower time frames.

One single line can make a big difference so don’t neglect looking for and drawing in horizontal lines on your charts

Sign up for market update emails