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RE: Engulfs - how to pick support and resistance
That's a pretty good example. I think most people don't underrstand S&R at all.
The other day I saw a post from someone who claimed a 'major support line' off the bottom of one single candle. This candle was from about 6 months and price had been nowhere near it. In fact, I think in the entire history of the stock it had only touched that level with that one single candles wick.
Oh no, it couldn't have been a short lived pullback because of some news item, it was a bone fide 'major support level'. Dumbasses...
Yeah, a really nice example. When I've written in the past that TA really is quite simple, it's using simple techniques like S/R and S/D, but these sorts of little nuances are what make them effective. As in your example, it's all about where you're looking.
I've seen a lot of people even failing to go back months or weeks in time and are only looking at recent PA for what's going to happen.
The problem is it's all very subjective. Just looking at that chart I would say a big line is the one in blue. Lots of touches (red), turns from resistance to support and even a fakeout in the middle. So to me the current price is bouncing off support and on the way up...
It depends how you trade though, for me I'd put a sell stop below the blue line and catch all the trapped traders... but it's subjective...
It is indeed subjective.
That area that you've marked the blue line from was actually from a bounce on a demand level, so I wouldn't necessarily call it a fakeout. (I appreciate that you're not looking at the entire chart here for overall context!)
As such, we've dropped below that blue line you've drawn too, but I'm interested to see how it plays out. I can certainly see why you've picked that line.
"we've dropped below that blue line" so I'd be making money right now ? sweet ! lol
No, the opposite. You said it would bounce off support and head up ;-)
ah, but I didn't say I would buy, I said I would put a sell stop below the blue line, so I'd be short right now... he he
So you did, my mistake!
no worries, I'm 100% contrarian. I know it's easy in hindsight (like all the gurus do..), but I would also have shorted that part I called a fakeout, when it broke back under the blue line.
Most people would have went long on that breakout, so I would've had a sell stop under that line and pick up all those sweet stop losses when people panicked. Look at all those lovely red candles of pain immediately after, yummy ! lolol