Support & Resistance Simplified

Support and Resistance Simplified offers a thorough overview of how understanding SR functions is an important aid to today’s trader. Information is presented in building block fashion, beginning with the basics and introducing in each subsequent chapter the elements of SR that you need in order to master this useful analytical tool. This book illustrates not only the technical elements of SR but also how to apply them to market theories, such as The Dow Theory. Having mastered the various techniques, we conclude with modern day innovations that, while they will not make you right all of the time, you will gain enough of an edge to put you ahead of the averages.

Introduction:

Beating the averages—that is every investor’s ultimate goal. Technical analysis is a science that anticipates short-term price changes by using recent patterns, trends, reversals, and ranges. This fascinating topic has as its foundation in the concept of support and resistance, the borders of a trading range in which trading action occurs.

This book explores the important aspects of support and resistance, and shows you how to use the concepts that technicians have developed to improve their own market performance. As the cornerstone of virtually all-technical approaches to price study, support and resistance is perhaps the most important concept you can master in developing your own analytical program. Since it is impossible to consistently and accurately identify the duration of any price trend, we have to depend on support and resistance patterns to look for signals of either change or continuation in price.

The support and resistance levels represent a concentration of buying and selling activity. When that concentration begins to evolve, signals develop. The astute technician, recognizing those emerging changes, is then able to act quickly and make buy or sell decisions before the market as a whole sees the effects. Once the effects have become obvious, the opportunity to profit has been lost, and that is the essence of the book: by mastering a few basic observations about price patterns as they relate to support and resistance, you will be able to improve your overall timing in the market.

This doesn’t mean that you will be able to predict the near-term future—especially concerning stock price movement—even though that idea is compelling. Investors, who assume that the purpose is to reliably predict emerging price trends each and every time, often misunderstand technical analysis, and specifically the various charting tools that it involves. The goal of creating and monitoring charts is not specifically to predict the future; rather, the goal is to improve our forecasting abilities, to better understand the likelihood of the next phase in a pattern.

Market technicians regularly monitor or chart price and volume, and in this process they have developed several specific methods used to analyze and forecast likely price trends and patterns. SR (as we refer to support and resistance throughout this book) has often been equated with the economic forces of supply and demand. However, this is not entirely accurate. Rather, SR acts more as a defining visual representation of price potential versus likely exhaustion levels, a broad range of the current supply and demand factors that are at work on a specific stock.

While supply and demand are forces motivating buyers and sellers to interact with one another, SR concentrations—and the trading range itself—define the relative distance between the two levels: the lowest price at which sellers are willing to sell and the highest price at which buyers are willing to buy. From the point of view of technical analysis, in which stock market price is the most important element of study, SR is the defining range, literally the lines of definition. Without the existence of SR range, we have nothing but an unpredictable and random movement of price from one point to another. For example, highly volatile stocks fit that description because price has not settled down into a trading range. By its very definition, “volatility” means rapidly moving, unpredictable, and even random change. No form of analysis—technical or fundamental—can be applied to understand nor to predict the next course of price movement for highly volatile stocks.

Contents:

• SR: The Foundation of Technical Analysis
• The Dow Theory: Applying SR to Individual Stocks
• Trend Lines and Channels: Techniques to Identifying SR Levels
• Chart Patterns: Visual Confirmation of Price Movement
• Swing Trading: Creating Maximum Profit Opportunities
• Learning to Forecast SR Levels
• Volume: The Other Confirming Measure
• Applying Modern Innovations to SR Applications

Support and Resistance Simplified By Michael C. Thomsett pdf