Home > Technical Topics > Technical Analysis > is resistance at the height of the bar or the candle wick?

is resistance at the height of the bar or the candle wick?

  1. Hi just what the title is asking. Also is it the same as for support? I cant really figure it out. It seems like sometimes it goes one way and sometimes it doesnt. Whats your opinion?
     
  2. My opinion is that it's an approximation, a ballpark number... especially if it's not a round large number.
     
  3. Well, get in the habit of referring to it at S/R, they're one in the same. It's just a level that exerts pressure on the price. Think of it like gravity of planets or moons. It will either come in too slow and stop at S/R or or will come in flying and slingshot past it going out as fast as it came in...or just come in at normal speed and find an "orbit" around it until something disrupts it and sends it flying on one directing or the other. And remember, it's not the price that exerts the pressure, but the behavior of traders at that price.

    The price approaches it, and more people decide it's a good pivot as you get closer (whether delta hedging or just "I think this is fairly valued at..."). Watch for it to happen at option strike prices (for example 350 will see more price action than 353.47...for both the individual retail decision and the professional hedge).

    S/R isn't a level that holds inherently for price, it's a level that confirms and reinforces signals, towards which prices will tend, or defining a range that movement outside of represents a likely move out of the "orbit" and continuation away from S/R.
     
  4. S&R could be anywhere. A candlestick is arbitrary and means nothing.
     
  5. we don' talk about a single candle.
    it should be a series of candles.

    perhaps you can post a chart so that we can better answer your question..
     
  6. I don't think it matters if there is one candle or a series of candles. It's still arbitrary.

    S&R happens at certain levels when in real time there is a transition to more aggressive buyers than sellers or more aggressive sellers than buyers. This then creates an excess of buyers or sellers that start queuing up in line. This excess is either visible by a stacking effect at certain price levels in the order book, or it's held off screen(ice berg) or in a dark pool( equities). This is really where S & R is coming from.
     
  7. It depends on the specific strategy. This in one strategy...the extremes of the wick may be used as s/r levels and in another strategy it may be used and something else is used instead as s/r levels and then in another strategy the length or location of the wicks may be uses as s/r levels.

    Whatever your strategy is...backtest it and then simulate trade it.

    The funny thing is this...even after you've backtested it and then simulate traded it...it still most likely won't be good enough to prepare you for real money trading because the human mind will most likely do something a little different because it knows its real money on the line in comparison to backtest/simulator trading. :sneaky:
     
  8. I don't ever plot S/R lines on my charts - they're just too unreliable. Many traders do get good guidance from them but I would recommend if you are drawing them, use a very thick crayon, not a very fine pencil.
     
  9. Some plot s/r lines without using crayons or pencils. :rolleyes:
     
  10. In my opinion they are better if you use zones not lines
     
  11. And some discount entirely S/R that's not at lines already on a vanilla chart.
     
  12. SQ is showing this beautifully today at $33. Pick your charting period, it's showing on all of them.

    Look at the Nov options chains and how much open interest there is in on the call side for the $33 strike and how little there is on the put side. This is typical delta-hedge S/R. And as foretold, it pulls towards the S/R level, and when it leaves, it does so like a rocket ship.

    Edit: It did it at $28 too on the daily chart. Note how there are either long candles through the price, or candles that touch the line. No tacit moves through S/R.

    Other good ones: FB, AAPL, NVDA, and NFLX at $150 (and all got there around the same time).


    One more edit: As far as practical application of this knowledge, 35 and 37 will show this pattern on SQ in some permutation before mid December (look at the chains!) and 40 will show it very strongly by mid January.
     
  13. Looks like we might get a test of the first hypothesis of this today. If I was a bettin' man, I'd be of the opinion that SQ's last tick today is exactly 35.00 +/- 0.02.
     
  14. In certain markets like gold and currencies I think trendlines have value for determining possible support/resistance...definitely not perfect, as you alluded to, but helpful....in other markets like the S&P 500, I've found prior hour/day/week/month high and lows to be more valuable.
     
  15. @Macca1
    Do you even know what you are talking about? The question is about candles. You are just trying to sound clever by defining levels in orderflow terminology.

    @cashclay
    IMO on your trading timeframe the candle body is what matters but only when compared to the closing position of other candles. One closing candle on its own mission is nothing but if you have a bunch of candles all closing in the same area with wicks then you have price action that is telling you something.
     
  16. Well, close but not quite. It definitely paused for nearly 2 hours at 35, but pushed through. I suspect we'll see $35 a lot more before moving higher.

    Yesterday also showed an interesting pattern. The $34 Nov puts had a ton of volume yesterday that would have been hedged and kept down the price.
     
  17. it can be. what does the daily look like and how is the volume?
     
  18. That was quick! And in consideration of that, I'd start doubting my prediction of $40--we might gap that on earnings.
     
  19. Myself, I would consider the bottom part of a candle not the wick, the support level. Also, I define something called recent support and main or daily support.

    In an uptrend, price in the form of candles pulls back to a certain level and is at least tested later one time, where this level holds. This is called a recent support level. This can for intraday trading provide a possible trade setup with and only with confirmation from your other technical indicators.

    The benefit of the recent support level is that you don't need to use a huge stop, however note that sometimes support will break by a few ticks so you don't want a tiny stop either since you need to give the trade room to breath.

    Now the target if you are scalping can be a few ticks, or if you use multiple contracts, you could have some sent to go back to target the resistance.

    Now obviously the recent support can break and price can trend down to the main or daily support levels. For example the daily support level could be defined as the lowest price that was hit during say the morning hours of the day. This price level should hold unless we have a trend reversal. A trend reversal can be caused by for example a negative report coming out later in the day, or North Korea launching a nuclear missile at the United States. This is why I use stops.
     
  20. The open (of a trend candle), not the high or low.

    A trend candle defined as the open-close range > than at least 50% of the high-low range.

    And as others have said, not an exact price but a zone - in relation to the close of the current bar.
     
  21. Well, we survived an earnings release and still showed this pattern...both $35 and $37 showed it today. Doubt of $40 by January has evaporated. Doubt in the chains will be punished. Believing what they say will be rewarded.
     
  22. My posts from October 26
    The chart from today...I'll let you decide if the options chains carry any predictive capacity. :)

    Obviously, I missed on the timing...but matters not to this bull!

    [​IMG]
     
  23. You nailed that one to the penny. SQ closed at $37.03 for opex. Wow.
     
  24. You predicted a stock will go up in an all-time bull market and NAILED IT!? Holy crap, hedgies must be calling you off the hook. Timothy Sykes slippery pudgy little body must be shaking with fear. All hail thee! A new messiah is born!!

     
  25. %%
    Good points; close price, in a bull market which is what we are in.And daily +monthly support matters more than a 5 minute chart[ noise]:cool:
     
  26. What I said applies to any time frame.
     
  27. %% True;
    as a practical matter most cant make a profit on noise
     
  28. I know I can't. Do you know anyone who can?
     
  29. It depends on context. What came before the bar/candle? What is the bar/candle doing in present time and from the developing context you have from all the bars/candles that precede it? What is price action attempting to do and how well is this effort playing out?

    There are 25 possibilities of what a bar/candle's form can be with a 5 tic bar (4 equal intervals). As a bar opens it is a horizontal flat line with the close. As price changes the bar changes it's form from a horizontal open handle to a high or low handle. If price does not retrace from the high or low and closes as it's furthest extreme, the body of the bar is it's dominant leg. These are 2 of the 25. If price retraces from it's extreme to a close handle then it has 2 legs. The difference between the open and close is the dominant leg. There are 6 of these types of bars - 3 dominant short, 3 dominant long.

    If price retraces from it's extreme and passes the open, this is a different type of bar. There are 12 of these. 6 of them closes on the extreme. 6 of them closes after retracing from the extreme. Both are divided equally between long and short.

    That leaves 5 bars. These are a special kind of bar where the close is equal the open. Two of these are dominant long and two are dominant short. The final bar of these five is the doji.

    In a sense the doji is the center of equilibrium and as easily as it is a beginning, it is also an ending when viewed within a larger context.

    You refer to the wicks of candles and the real body. This image is at the same time as simplifying it can also be misleading in that prior to the real body forming after the wick, the wick itself was a real body. You only know it as a wick because price retraced it's entirety. Again, as this candle was forming this (what would become a wick) looks like a real body. This real body could continue in the dominant direction. Sometimes it pulls back retracing only to surge again to make a further extreme. Other times it does the above then retraces into a reversal and changes the form of the bar from what it looked like at the beginning of the time interval to a completely different form at the end of the time interval.

    With this single bar one has 5 data points - OHLCV. By adding another bar, we get 5 more data points but also the idea of Support and Resistance come into being. Does the current bar's current price > = < any of the 5 data points of the previous bar? With these two bars the 10 cases of price and 11 volume elements can begin to be discerned.

    From a bar to bar perspective this is exact to the tick. When one zooms out and begins to compare and contrast multiple bars, then the idea of zones begin to make sense. This pattern can be applied to any timescale for each are composed of their own bars. As one goes from larger timescales to smaller faster ones, the experience is of 'looking' inside a bar becomes a desire. One can zoom in only so much for the smallest increment of change is the tick. To look inside a tick one must go to the DOM and T&S to observe the dynamic between those offering liquidity and those taking it. Those offering liquidity are the explicit resting limit orders and the implicit which are the ones not showing their hand with resting orders but re/supplying the current BbidBask pair with limit orders as the price is 'sticky' to that price level.

    The above behavior is passive, in that the priority is on a better fill price.

    By observing this level of detail, one sees that a single or group of market participant with a large order/s can lift the offer or hit the bid clearing that price level and possibly other levels with it. Sometimes this causes a domino cascade of stop orders converting to market orders adding fuel to the move. The move can be successful or fail. Other times other participants with different ideas in mind attempts to do it the other way. Sometimes this comes from market orders activated from resting limit orders that are hit. These behavior's are more aggressive in that they are prioritizing time and willing to submit market orders for this privilege as well as defend a price level they have an objective to hold.

    Back to the idea of support and resistance, value traders identify what these levels would be by the nature of their method in attention to fundamental values. They know with greater conviction for they have processed a greater degree of quality information to infer what these values are. The paradox is that these values are not well known. Those that know them we can call informed. If the values were well-known, informed traders would have no reason to trade for there would be no profit opportunity.

    The idea of signal and noise is paradoxical in that the observer is the one making this determination by judging the observed. The only way they can judge is by comparing and contrasting to what they know. To increase signal (what we can know), one increases the spectrum of differentiation that they have built up to now, this requires work.
    Another way is to go to a larger/slower timescales and use the law of averages to smooth out faster price variations. Although this is easier it does come with a cost.
     
  30. %%
    Its a special situation; but market maker$ can profit off noise. I use the Market Makers Edge/Lukeman /6 month candle-charts. I remember my typing teacher in school did not seem to enjoy my ''turtle '' nickname LOL:D
     
  31. Anyone in particular or are you just repeating what others have said?

    Because my understand about market makers behavior relates almost exclusively to intraday price movements.
     
  32. %% Ever read the book ;which was my post point?? Sounds like you have not??:cool:
     
  33. Ever read ..................... what book?
     
  34. I am confused how come you wouldn't use the wick considering price reached that level.
     
  35. Wicks for the most part are exaggerations of price moves, traders who got caught betting on the move continuing. From today's ES globex session:
    ES wicks.png
     
  36. If there is a wick it's a sign of rejection and very few trades take place there. Try to think of support and resistance as zones not exact lines!
     
  37. But the value actually touched that point so it counts. If you change the length of the candles the body will change anyway. The top of a 5 minute candle might be the upper part of the body on a 2 minute candle.
     
  38. You are correct but if it happens at a s/r zone or previous swing high or low it's still a sign of rejection. The higher the time frame the more important the wick as far as rejection
     
  39. The way I use or ignore wicks on trend bars (the key) is valid and just as important on all time frames. Of course a signal on 5 minutes is not valid for 5 hours etc.
     
  40. YM - this morning's globex session this time:
    YM.png
    Actually just noticed middle example is just trend bar, no wick to ignore. And I missed another example up near top of move.