S/R candle chart question

Discussion in 'Technical Analysis' started by Kastro_316, Apr 23, 2006.

  1. This might seem silly, but when determining S/P (or anything) do you go by the bottom of the lower shadow of the candle or the close of the candle?

    Take a look at my chart....Thanks :)

  2. Sorry, here it is.
    • sr.jpg
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  3. Lucrum


    I'm sure it's at least in part personal preference but for horizontal S/R I like to use the open/close.
    So for the question on the chart, I would say no.
  4. How about making it a zone?
  5. 4re


    It should be the extreme top and bottom of the candle. That is the whole idea of support and resistance. The price gets to a certain and bounces off. The more times it hits a level and bounces off the stronger that support or resistance becomes. So yes include the wick and tail. Hope that helps.

  6. I was taught by a 20 year trader/broker that highs and lows are more important than open close. Take that for what it's worth though, I use highs and lows primarily.

    An important point he mentioned, the markets are inprecise a market order here and there will cause a high/low on the wick of a candle to maybe be a tick higher/lower than you want. Don't sweat it, it you have alot of hits at 712.10, and then one at 712.20 in ER2 let's say then call it 712.10 and do worry about the extra tick on 712.20 it could have easily be an errant trade or slip on a fill, 712.10 is still valid and not negated by one high/low at 712.20. Come to think of it I will be curious to hear opinions on this?
  7. I've been struggling with this concept for a while now.

    I go back and forth all the time over this idea. As a result, I've settled on using a "zone" to define S/R. The zone being from the close to the extreme H/L price.

    That said, the question of what breaks S/R arises. Is it a trade through the HH/LL? A close through the close? Or a close through the HH/LL?

    In response to Dandxg's comments, if a slip of ER2 through R at 712.10 to 712.20 isn't a big deal, then what is? Is it a close through 712.10 that constitutes break of R?

    I'd love to hear from others how they view S/R.
  8. Hi golablue,

    The question really isn't what exactly is a break of the s/r level or zone.

    To me, I think the question should be is there a valid pattern signal when the s/r level or zone is reached (more about this later in my post).

    If you can answer that on your own...you'll know what s/r info to ignore and which ones to trade.

    There are so many different ways of defining s/r info that it really comes down to a personal preference.

    More importantly, the right way is one that is profitable and it doesn't imply such will be profitable for someone else that may have a completely different Entry Signal when that particular type of s/r info is reached.

    With that said...s/r info is suppose to represent a change in supply and demand.

    In my opinion, such a change can not be represented by a single price level like some line drawn in the sand.

    It usually represents a zone of price activity where volatility had suddenly either increased or decreased and then followed by (within a few intervals) a zone of price activity that stablizes just long enough for a change in supply and demand to occur.

    Therefore, one of my favorite types of analysis is WRBs (wide range bodies) and Long Shadows (candlestick wicks) because they represent sudden changes in volatility levels.

    Further, a s/r zone stays intact as long as there are no intervals in the price action that occurs afterwards that have their bodies fill in that s/r zone.

    Thus, you can have several key s/r zones that develops as prices traverses throughout the trading day from Open to Close.

    I'm just not a fan of using s/r levels as if they never change throughout the intraday price action while we all know that volatility changes throughtout the intraday price action for many different reasons that moves the market (key economic report releases, regular schedule market events et cetera).

    The above statement about one particular way of using s/r levels (that don't change) is represent by the attachment that was presented in this thread.


    If you look at the above attachment closely...

    I see a s/r zone in the entire range of the long lower shadow of that White (green) Hammer Line that formed two intervals after his first annotations on that chart.

    (Note: I said zone and not a valid Hammer pattern to prevent getting confused about the Trading Hammers (revisited) thread at ET)

    Last of all, regardless if its a level like a line drawn in the sand or a zone...

    Just because price activity reaches it doesn't imply a pattern signal will appear.

    I've seen too many times that when price declines to a support level...

    No bullish pattern appears that represents a new change in supply/demand and prices than continues southward and vice versa for resistance levels.

    I've just met too many traders that open a trade position because they think that the s/r level or zone that has been reach...it'll support the trade.

    P.S. Any one that use s/r info for part of their entry method should also be using it as part of their profit (exit) method.

    Just seems like common sense to me.

  9. Niha makes some very good points.

    I think the most important points being:

    A support or resistance point is defined by the trader.
    What is S/R to one may not be to another.
    It comes down to what YOU have observed in the past
    that has shown itself to repeat more times than not as
    a characteristic of S/R

    Personally, I find all of the price action important:
    For me, the extreme high and low of a candle
    is important information, because, if that high/low
    has CERTAIN OTHER price action before or after it
    (this certain other is an entirely different lengthy
    definition) then it may be a confirming factor of
    what I have recognized in the past to be a reliable
    S/R zone.

    And on that note; S/R ZONE, not S/R to the exact tick.
    I'm sure there are trading methods that look for 1 tick
    past a certain price for entry, but, again personally I find
    that S/R is an AREA/ZONE.
  10. I have attached a chart showing how support can be an AREA or ZONE.

    This is the DOW daily chart. It is self explanatory.
    #10     Jun 27, 2006