Support & Resistance

It is very crucial when we talk about this topic. In one hand, people always say that this method isn't effective, in the other hand, people love this way as it is so simple yet powerful.

There are two groups of believers in this method:

1. Drawing S & R (Support & Resistance) only based on the body & won't include the tail

2. Drawing S & R by including the tail as the S / R.

I'm the second group of the believer, that I think by including the tail, we are not only being more detail but also being more precise & careful in analyzing the price movement. The basic concept of this method is only two sentences:

1. Once the price breaks the resistance, it is believed to continue the bull

2. And in contrast, once it breaks the support, it is believed to continue the bear

This method looks so simple, but also this method needs a lot of criteria before being applied to the chart, which is so subjective based on the method of the individual. For me, this method really concern with the trend of the chart before buying on the stock.

Once the price has broken out the resistance, then the resistance is believed to be the next support of the price, but this is not always as it can be a false breakdown if we say the support is the broken resistance.

This method is also known as Breakout method or Buy on Break method, which is believed to be very popular nowadays. Example is shown as figure.

Happy Investing^^

Disclaimer ON!!!