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Support Can Become Resistance

Breakout Support Line

Practice session:

Exercise: Find the correctly drawn support levels. Show exercise

Support and resistance in a range

The price confronts the same support and resistance levels several times before breaking out of the range in a ranging market. 


support

Number 1:  Price finds resistance in a range

Number 2: Price finds support in a range

Number 3: Price finally breaks out of the range through support

The illustration above shows, the resistance level provides a clear upper boundary and the support level provides a clear lower boundary to the range.

Breakout:  This occurs soon after the sellers overpower the buyers and break through the settled support level.

Placing S&R levels with wicks and bodies: 

The two illustration charts depict the placement of support or resistance lines using the wicks and the bodies of the candle

The chart below is an illustration of using the wicks of the candles to place a resistance line.

2.Support can become resistance

Practice session:

Exercise 1: Find the resistance level turned into support Show exercise

Exercise 2: Find the resistance level turned into support Show exercise

Exercise 3: Find the resistance level turned into support Show exercise

Support can become resistance

Sellers will enter the market and the price will continue down when the price breaks through a support level, when the price comes back up to this level.

The illustration below depicts support becoming resistance and resistance becoming support. 

The same price level in this illustration acts as support and resistance multiple times.


support

Number 1: Price finds support

Number 2: Price breaks through support

Number 3: Price then returns to the previous support level which has now become resistance.

Number 4: Price breaks through resistance and then finds support once again.

Nut Shell:

An overview of the lesson discussed so far….

At the support level, there are adequate buyers to stop the price from falling further and reverse the price to the upside.

At the resistance level, there are adequate sellers to stop the price from rising further and reverse the price to the downside.

Place horizontal lines on a chart where the price seems to stop repeatedly to find the support and resistance levels. 

When our approach is stable, we can use the wicks or the bodies of the candlesticks to draw support and resistance. 

Support can become resistance and resistance can become support.

We need to be careful to avoid false breakouts. 

The price may pretend to break through support or resistance, but will reverse again in the opposite direction.

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