Common Patterns of Support and Resistance You’ll Learn with Technical Analysis Training
The market's reaction to support and resistance can happen in various ways ...
As you go through technical analysis training, the following are some patterns that can be observed when that happens in the market .
One we might call "touch and away" as if the market is trying to reach on for some level of support and resistance, and when it gets close , it reverses suddenly and retreats , as if there was a build-up of pressure that is suddenly released . This is an exhaust . It is a formation where the resistance level holds . It is a pattern that seems like it is trying to break its way through , by chewing the level of resistance or support like a dog knawing on a bone , but it fails , and it doesn't get through , and then the market makes a turn in another direction .
Yet another way that support/resistance is able to give way is when the prices pop up through the level of resistance that is anticipated and then they get higher still. The pop or gap can occur quickly and can take a trader by surprise . Today with electronic trading platforms and 24 hour markets fewer gaps like this are seen as the overnight trade is continuous and not a long time where no trading occurs. Still gaps can still occur , and it's important to know how you should trade them . The thing to keep in mind in your technical analysis training is that when broken , support can turn into resistance and resistance can turn into support. The new price level will usually test the support and resistance that was previously in place and will then go on towards the pop .
Another breakdown of support and resistance that occurs is when prices slice on through the barrier that is anticipated as a knife cuts through soft butter, like there was no support or resistance even there .... and this really is what happens. Price quickly scoots right on through . This is most often seen when we anticipate support or resistance on one time frame but there is nothing to back it up on a higher time frame . One example is that if resistance is seen on the daily but to that point the weekly chart shows nothing - we should be on alert .
This information is an important part of technical analysis training - when the phenomena you think is there is not there in reality . This is a particular situation where support is showed by the technical analysis of the lower time period , but it is non-existant in reality, or if it does exist in the real world it is weak and has little or no effect on the market . The trader that is multiple time period will be alert to this situation because no higher time period tools setting up the area will be there. The good thing in this situation is that it quickly can be seen and we will be able to determine very soon that this is a negative pattern and there is not any resistance or support occuring in the area.
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