Posts Tagged ‘Resistance Lines’
Frankfurt’s Infineon Comes Up Short
Here is Frankfurt’s one and only INFINEON TECH, who has recently started a new upwards trend. Upon first glance at the chart below, it is my gut reaction to say “good time to buy” because it has indeed hit the supporting upwards trend line and should be at an optimum price for a strong buy. But technical factors, and too many of them, are in the way.
For one, a very natural line can be drawn above the current trend. This and the line of the trend itself form a pattern we call an opening fan. These can become unstable as they run their course and for the short term, these 6 weeks are enough. The pattern is expected to break soon and it will probably be in the downwards direction because several technical factors are here to influence this.
For one, the Moving Average 5 has been crossed by the MA 21 and the MA 13 is on its way to do the same. Five days ago the Directional Movement DI+(blue) crossed the DI-(pink) going downwards, a clear sell signal. And the Price Oscillator shows a slope down to zero and heading into negative territory, this being another strong sell signal. Add to this failure to be supported at current levels, and the fact that the nearest support below is at 4.43, about 10% below current market price, and here you have a good case for a sell-short position on this darling equity.
This is the way the Chart looks:
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European Stock and Currency Summary
The Federal Reserve Bank chairman Ted Bernanke commented Tuesday that the U.S. recovery will remain intact. This continues to lend a prop to risk appetite as did talk that Thursday’s China export data will show a 50% increase. European equity exchanges traded positive throughout the session.
The risk currencies advanced, CDS rates came down and peripheral Euro Dollar zone bond rates came down somewhat. EUR/USD nudged 1.20 from a 1.1924 low, GBP/USD recovered from its ratings-worry sell off Tuesday adding one cent to 1.4534, despite a surprise widening in the visible trade balance to GBP7.2B. USD/JPY pivoted around 91.50. The main European indices are up around 0.4%, gold is down $3 at 1234oz after printing a lifetime high Tuesday and oil is up $1 at $73bbl.
Where the turnarounds are happening are all around strong support/resistance lines all historic in importance. The Dollar Index Futures hit a major resistance line yesterday at an in day high above 89 points and retreated. This seems to be the end of the monthly upwards trend that started when prices broke the long-term symmetric triangle upwards as I pointed in my previous article. The Futures Index will not, it seems to me, make its intended goal of 92.3 points, but this is true for most pattern breaks. It is hard to say for now what will be with the US Dollar rates around the world, but the upswing seems to be ended when looking at Dollar/World Currency pairs as they end streaks and hit s/r lines in addition to seeing the Dollar Index Futures as is shown on the Chart Below.
This is the way the Chart looks:
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Gann Lines and the S&P 500 update
According to my calculations, the major resistance line 1182, of which I spoke earlier, was passed by the S&P 500 by like a freight train. As shown in my new-styled charts below, both the weekly and the daily charts of the S&P 500 show an upswing of a 45 degree angle, or what is called a Gann Line, on them. This is the optimal line for riding an upswing and the longest upward streaks are based upon such lines. I will remind everyone that the S&P 500 is the world’s major stock market barometer on the world’s situation in general, and the world financial market situation in particular. Still, this is NOT the same trend started in March, 2009; nor is it a medium range trend. It is still only a month and a half or so old and it still remains to be seen if, for example, the 61.8% fibonacci line will be broken, as it is a major resistance and a place where many corrections, or temporary downturns, seem to start.
This is the way the weekly Chart looks:
This is the way the daily Chart looks:
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Support/Resistance lines
A support or resistance line (s/r line) is one line that functions for both. when th price level goes to it on the way up, it tends to stall, sometimes going back down to start, at least temporarily, a down cycle. Sometimes it will break through relatively fast and continue upwards, but the vast majority of the time it will go above the line somewhat go back down to the line to RETEST the line and after it will continue on its way up. That is to say, it meets RESISTANCE at the s/r line, passes it temporarily then somehow is drawn back to it, RETESTS that line and makes it now into its SUPPORT line, draws support from it and therefore continues upwards, bouncing off the support.
There are other instances, for example the false break, where the price line or candlestick crosses the line 1 or 2 times and then withdraws, sometimes damaging our false hopes.
I always draw s/r lines on the candlestick chart, trying to match the lows and highs (intra-day) on the ends of the candle wicks. When that is not possible, for lack of wicks or simply that other places on the line already match, I use the closing (line) chart to check my accuracy. Sometimes, the only method to use is the line chart, when there is no other choice.
Making accurate and testable s/r lines takes a lot of practice. And it has to be tested to have functioned for long periods of time to show its strength. A line is stronger the more history it possesses, that is how far back it stays accurate in its role as an s/r line. The real proof lies in trading. There you see your lines and what they do or don’t do to the price line. Also I do not recommend at all trading without knowing Technical Analysis well, so you at the novice level have to practice and practice. Some companies, like FXCM–a forex currency trading company, for example, offer demo accounts to practice completely free of charge–why spend hard-earned money to train or pass a course. You can learn the material you need from books, on-line videos, or my exclusive program here. To remind you this is the 2nd part of the Technical Analysis course I am giving over (support/resistance lines).
Please check out the lines I drew on the chart, they should help you see a little of what it is all about.
This is the way the Chart looks:
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Picture This!
Below is a chart, or Candlestick Chart if you’d like to call it. Parts of it are much discussed elsewhere in this site, but mostly not. I think it is self explanatory and being that it is complicated and hard to understand, it has the honor of being the 1st in the advanced tutorials. Don’t worry, I’m working on a HEAVY project that would put hairs on the most experienced CMT’s chest–supposing he wants them there.
Here is the way the Chart looks:
PLEASE CLICK ON THE PICTURE TO GET A COMPLETE, LARGE VIEW
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Where are my supporters?
When we speak of support/resistance in Technical Analysis, there is only one meaning: the horizontal line that we wish to address in relation to the market value, or price line. This is a price evaluated line, and the market-value of the stock or other equity we are viewing will go up and down above and below this line. The line we speak of will act as a temporary stopping point for the market price line moving through it. When the market price hits the line in an upwards going direction, we expect that the price will halt even momentarily on, near, or even a little above the line. It is then expected to withdraw somewhat, maybe in favor of a downwards direction. But it may go down only for a few percentage points then go back to the line and cross it. Or it may stay on the line for some period and the make its directional decision.
These lines are drawn based on the halting of the price on them on previous occasions and are used to try to predict behavior in the future when the price come near the line, whether it’s excpected to dawdle, withdraw or retest it. On rare occasions we see that the current price value completely ignores the line and sometimes even an historically significant line.
If you look at the chart below, you will see such a state with Lenovo, Hong Kong. It broke resistance, then came down and in the example it is sitting pretty on the historical resistance line it broke and is now turned to support. The direction seems pointed upwards.
This is the way the chart looks:
Lenovo, Hong Kong on the way up after breaking line