http://www.netpicks.com/tjgiveaway1 - YOUR FREE TRADING SYSTEM One area people look for moves is around support and resistance. I’ve mentioned support and resistance before but basically I look for obvious areas as “hidden areas” don’t really attract the masses. You can also expand your thinking to include ranges that have prices moving back and forth between the support/resistance extremes. The question you should always be asking is will these support and resistance zones hold price or will they fail and either keep moving or simply expand the range? There is a rather simple way to be clued into the probable hold or fail and that is the rejection, or lack thereof, at the extremes. What would you expect to happen to price if a support or resistance zone was going to hold? I would expect price to move away soon after testing the zone. http://www.netpicks.com/the-action-at-support-and-resistance/ - READ MORE

1. The Action At Support And Resistance
http://www.netpicks.com/the-action-at-support-and-resistance/

2. I mentioned in another trading tips
article that a "that's different" look to
the chart can set you up for some
great trading opportunities.

3. In a nutshell, a move that is different
from the action that came before it is a
clue that for whatever reason,
renewed interest in the instrument
you are looking at, has occurred.

4. This can set you up with a trend move
or a mean reversion trade. Regardless
of which it is, looking for moves that
are different is not a bad way to get set
to make a trade.

5. One area people look for moves is
around support and resistance. I've
mentioned support and resistance
before but basically I look for obvious
areas as "hidden areas" don't really
attract the masses.

6. You can also expand your thinking to
include ranges that have prices moving
back and forth between the
support/resistance extremes.

7. The question you should always be
asking is will these support and
resistance zones hold price or will they
fail and either keep moving or simply
expand the range?

8. There is a rather simple way to be
clued into the probable hold or fail and
that is the rejection, or lack thereof, at
the extremes.

9. What would you expect to happen to
price if a support or resistance zone
was going to hold?

10. I would expect price to move away
soon after testing the zone.
Side-note: "Soon" is
relative to the time frame.

11. This chart is a daily chart of an
instrument and we've been in an
uptrend on this time frame for about
two months. We have been in a range
where the support and resistance zone
has been defined. The higher time
frame is also in an uptrend.

13. 1. Shows a sound rejection of the lows
of the range. While the recent past
has shown tests of the lows, this test
leaves no mistake that buyers stepped
in quite strongly at this point. I find
these types of rejections to be a
"that's different" than I've seen in the
previous price action.

14. 2. We did see an expansion of the
range marked with the green arrow
and while not perfectly visible, the
candle labeled 2 has a closing price at
the same level as the previous
resistance zone.

15. Even more telling, even though there
was an expansion, the candle was
certainly in line with the other green
candles and the solid red candle
solidly ended that bulls run at that
point.

16. This chart is a lower time frame of the
same area and a day before the strong
rejection of price from the support
zone. The horizontal line indicates the
area that was acting as support and
you can see with the aid of the black
line how forcefully price pulls away
from that area.

18. You can see:
A. Test of the support zone, price pulls away.
B. Price breaks lower and is turned away
C. One more test and as indicated by the line,
price sharply turns.

19. Remember the green candle that
expanded the range?
Here is an inside look of that day.

21. FR is the former resistance and as
price breaks that:
A. Price sharply turns from the new
high
B. Indicates the retest and sharp
rejection at new high

22. Not shown on this chart but price
ranges with little interest the rest of
the day and it rapidly dropped the
following day printing a beautiful
momentum candle.

23. Do you think the strong momentum to
the downside enticed those that trade
breakouts?

24. Price expands the range and then
drops the following day to the bottom
of the range with an obvious
momentum candle. Breakout traders
read that has bear strength and are
waiting for price to slam out the
bottom of the range.

25. As we saw in the first chart, they were
disappointed as price does break the
zone but strongly rejects at lower
prices trapping shorts and forcing
them to exit that helps propel price
back to the resistance zone of the
range.

26. What happens when price returns to
resistance?
Looking back at the first chart and the
number two candle, we see price
break to new high, reject but holds at
the close of the previous candle in
what many call a doji candle.

28. Taking a micro view of that daily doji:
A. Breaks back below the previous close to
the previous resistance zone and is soundly
rejected.
B. After making a high, price pulls back to
the previous close and as shown by the
black line, chops around on top of
resistance.

30. Can there be any doubt that price will
rocket the next day?

31. Yes, there can be a lot of doubt but in
trading, we think in probabilities.
The price action highlighted by the
black line shows that rejections of
levels usually results in price moving
away soon after arrival.

32. When the probabilities of the test
being successful increases, we
generally see price consolidating at the
extreme.

33. The last chart showed something even
better and that was the sharp
rejection away from the longer held
resistance zone when price dipped
back inside. We also never saw price
move too far way from the support
zone when that zone broke and that
should be a heads up as well.

34. The trading chart tells the story and
unfolding price action around key
areas of the chart can alert you to the
probability of one thing happening
over another.

35. As hundreds of hours in front of the
charts pass you by, you will see the
weak and the strong play out and will
begin to hopefully be able to plan
trades off the probability of X over Y
happening.

36. Start today by marking off obvious
areas of support and resistance and
then drill down to the price action
around those levels. Experience is
always the best teacher.