SMA bounce

Discussion in 'Technical Analysis' started by Pekelo, May 5, 2011.

  1. Pekelo


    Several times the SMA line acts as resistance/support and the price bounces back from it. I like to use SMA 9, because that's what has been working for me.

    How to tell if it is going to bounce or not? Usually the first approach after a trend change bounces. That simple...

    Here is the 1 month/daily chart with 4 examples on it:


    The 4th example is an interesting one, because it happened overnight (so you can't see it on this chart). Last night the futures kept going up, reaching 1348 and that would be 1352 on this chart. From there price properly dropped...
  2. If you say so...:)
  3. kut2k2


    It appears SMA9 works only as resistance, not as support. But of course the sample is exceedingly small.
  4. Pekelo


    I don't know where you get that, since in the posted example it was 2-2, so 50%...

    Anyhow, since some people actually showed interest, here is today's 5 mins chart so far:


    The first one and the last one are the usual, "first approach after a trend change" types. There are 3 in the big circle, but they are the "return to the mean" type....
  5. kut2k2


    And I don't know what you mean by that.


    The third bar touches the sma then the fourth bar breaks through.
    Ergo, no support.

    The ninth bar touches the sma then the tenth bar is lower.
    Ergo, good resistance.

    The 20th bar touches the sma then the 21st bar breaks through.
    Ergo, no support.

    The last example, according to your own words, met good resistance.

    Now you know why I said what I said.
  6. Pekelo


    The 3rd bar touches the SMA, then bounces back, good support.(bounce is about 13 pts) It took the 4th bar to make it through.

    The 20th bar touches the SMA and bounces back, good support.(bounce is about 7 pts) Only the next bar broke through it.

    So in both case there was an SMA bounce, good support....

    I don't see the problem....
  7. You may find that the price action bounces off two different SMAs. (i.e., one short-term and one long-term) I've seen it alternate between two different ones and the tricky part is figuring out which one it will go through and which one it will bounce off of.

  8. Pekelo


    A funny thing happened this morning on my way to this forum:


    That is one good 5 pts SMA bounce showing it on the daily. Since we have a huge upgap, this could get even bigger, hard to tell though...

    To avoid confusion and disambiguity, it is better to just stick to one at a time. That's why I use SMA 9, although sometimes other numbers work better.... Also sometimes different charts show sligthly different action, so it is possible that for someone else let's say SMA 11 works better. It is rather easy to backtest and see which one should be used...
  9. kut2k2


    No problem, you and I just have different concepts of support and resistance. Personally I can't trade inside of a bar (I only look at bars in my trading timeframe and higher timeframes), so just having the high or the low of a bar touch a sma means nothing by itself. It's what the following bar does that makes for a S/R.

    Good trading to you.
  10. Pekelo


    Not really. It is not a bar issue, it is a price issue. Just imagine if you were looking at the same action but with a different timeframe. 15 mins instead of 5 mins. Then you wouldn't see a bounce, but if you just watched the price, it did happen.

    If the price touched the line and bounced, then it was a S/R, end of story. No S/R stays S/R forever, so the price sooner or later will penetrate it...
    #10     May 6, 2011