Will it bounce or break?

Discussion in 'Trading' started by lassiter, Aug 22, 2001.

  1. lassiter


    When a stock approaches a support level I either go long looking for a bounce or short it looking for a break.

    Can anyone suggest what I can look at in the broader market to help me determine whether a stock will bounce or break?

    Since most stocks mirror the index's I find these difficult to use. They are both moving in the same direction.

    Thank you.
  2. Turok


    >When a stock approaches a support level I
    >either go long looking for a bounce or short
    >it looking for a break.

    Well, I can tell you what I do in that situation:

    I don't go looking for anything. If it breaks, I(may)go short. If it bounces I(may)go long.

    That's the difference between "predicting" and "reacting".

    It will save you a ton'O'money

  3. Babak


    some other things to watch for are:

    how fast/slow trades occur at the pivot
    volume at the pivot
    whether trades are at bid/ask or splitting it
  4. I agree with Turok. Personally, I will often go long around the support level, and if the stock breaks out to the downside, I will reverse and go short. You can get whipsawed sometimes though..
  5. vitajex


    The "Trading Lesson of the Week" at pristine.com
    (free service) discusses double tops and bottoms.
    It looks at moving averages, relative strength
    (stock vs. futures, etc.), and prior trend to try
    to determine whether the structures will hold or fail.

    Ironically, using their techniques, you might have
    guessed the double bottom in the intraday Nasdaq
    futures today (8-22) wouldn't hold: prior downtrend,
    under most MAs, weaker than S&P, etc. But it did
    hold. Ditto what's been said regarding responding
    and not predicting.

    But what are some things you look for to get an
    idea about reversals? With the NQ futures
    today, I guessed around 1520-1525 would be a reversal
    point. Why? It's about a 61.8% retracement of the move
    from yesterday's highs before the FOMC decision to
    the lows of today (a key Fibonacci number that lots
    of traders are looking at...probably self-fulfilling).
    It's about a measured move (the move from the double
    bottom lows to the highs between the double bottom,
    added to those highs), and it's near the 5-min 200 SMA.
    When I see a confluence of targets in one area, I
    think it may offer a low risk entry (much like a
    double bottom). I always wait for the market to

  6. It's not easy but volume will tell, if you are on the
    1 minute chart and have increased volume, it could mean
    they break it. Also if greater market moves as well.
    The volume is the key. I used to watch a service provider
    aka trade-prospector. it has S/R forecasts daily. they break
    down a S1 S2 S3 -P- R1 R2 R3 so when the you are
    moving away from the P(Pivot point and get closer to
    S1 - maybe even bounced off once or twice - you see
    big volume - bet ya it will breat or at least I wont be
    buying there. It's not 100% but what is ?
  7. ktm


    I'd let the stock tell you which way it wants to go. Wait for it to make the move then go with it. Most seasoned pro's will tell you that it's not catching the tops and bottoms...it's riding it through the middle of the move that will make you most of the $$$.

  8. Ideally, of course, you want to be already short as price approaches support and already long as it approaches resistance. That way, whatever happens you either have a continuation of the move, or on a bounce, can consider covering or reversing. Failing that, I too would wait to see what happens in the key zone. Often price draws an ascending or descending triangle in these situations. Probably 2/3 of those are broken in the continuation direction, but those that fail when the angled trend line is broken are excellent candidates for a full-blown reversal. (We had two upside breakouts of descending triangles in S&P futures today, the second of which started the big afternoon rally.)