Technical Analysis Training - Some Common Patterns of Support and Resistance

When it comes to support and resistance, the market can react in many ways...

As you take your technical analysis training, here are a few patterns that may be seen when this shows up in the market.

One that may be called touch and away as if the market continues to reach for a support resistance level , and once it comes close, it turns and retreats, as if there was a build-up of pressure that is suddenly released . This is an exhaust . Resistance level holds in this formation . This is a pattern that seems it is trying to break on through , by worrying the level of support or resistance like a dog and his bone, but it doesn't work out, and does not break through , and then the market makes a turn in another direction .

The second major way that support/resistance gives way is when the prices pop up through the level of resistance that is anticipated and go up even higher . The pop or gap can be startling and sudden and can take a trader by surprise . With today's markets that are 24 -hour and the trading platforms that are electronic we see fewer gaps like this as the overnight trade is continuous and there is not a long time without trading . Nevertheless gaps can still occur , and we need to know how to trade them . The thing to keep in mind in your technical analysis training is that once broken , support can turn into resistance and resistance can turn into support. Generally we will see the new price level test the previous support/resistance and then continue on its way in the direction of the pop .

Way number three that there is a breakdown of support and resistance is that the anticipated barrier is sliced through by prices like a knife through a bowl of jelly , like there was no support or resistance even there ....and that is exactly what is happening . Price quickly scoots right on through . We see this occur when we anticipate support or resistance on one time frame but there is no backup from a time frame that is higher. If, for example, the daily shows resistance 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 in reality, the phenomena you believe is there, really isn't. This is a particular situation where the lower time period technical analysis shows support , but it does not exist in the real world , or if it does exist in reality it is weak and there is no real market effect . The trader that is multiple time period will see the situation because no higher time period tools setting up the area will be there. The good news is that it can be seen fast and you quickly can figure out that this is a pattern that is negative and that in the area there is not resistance and support .

Author:
Peter Markham is a Forex and financial futures trader with 30 years practical experience in the markets. He received his education in Sydney and Los Angeles and has been a trading consultant worldwide. He has written widely on Technical Analysis Training. Among many possible technical analysis courses Peter recommends www.drummondgeometry.com for an original and productive trading approach.