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Technical Analysis: Support & Resistance

The document discusses how resistance and support levels can form near prior highs and lows on price charts. It analyzes charts of the Canadian dollar, unleaded gas futures, soybean oil futures, and wheat futures to show how price reversals occurred just above or below previous peaks and troughs, establishing areas of resistance and support. While prior highs and lows provide a general range to anticipate resistance and support, they are not absolute levels and prices may rise above resistance or fall below support without breaking through.

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Iancu Jianu
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273 views3 pages

Technical Analysis: Support & Resistance

The document discusses how resistance and support levels can form near prior highs and lows on price charts. It analyzes charts of the Canadian dollar, unleaded gas futures, soybean oil futures, and wheat futures to show how price reversals occurred just above or below previous peaks and troughs, establishing areas of resistance and support. While prior highs and lows provide a general range to anticipate resistance and support, they are not absolute levels and prices may rise above resistance or fall below support without breaking through.

Uploaded by

Iancu Jianu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Page 60

Figure 4.13 
Resistance near bottom of prior trading range: December 1992 Canadian dollar.

Figure 4.14 
Resistance near bottom of prior trading range: unleaded gas continuous futures.

   
Page 61

Figure 4.15 
Resistance at prior high and support at prior low: soybean oil nearest futures.

Figure 4.16 
Resistance at prior high and support at prior low: wheat nearest futures.

   
Page 62

Figure 4.17 
Resistance at prior high and support at prior low: soybean oil continuous futures.

In Figure 4.16 the late 1990 low held just below the 1986 bottom, while the 1992 reversal formed just above the early 1989 peak. Although the concept of resistance 
near prior peaks and support near prior lows is perhaps most important for weekly charts, such as Figures 4.15 and 4.16, the principle also applies to daily charts, 
such as Figure 4.17. In this latter chart, note that the May 1994 and December 1994 price reversals occurred just above the January 1994 peak, while the October 
1994 low formed just slightly above the July 1994 low.

It should be emphasized that a prior high does not imply that subsequent rallies will fail at or below that point, but rather that resistance can be anticipated in the general 
vicinity of that point. Similarly, a prior low does not imply that subsequent declines will hold at or above that point, but rather that support can be anticipated in the 
general vicinity of that point. Some technical analysts treat prior highs and lows as points endowed with sacrosanct significance. If a prior high for a stock was 65, then 
they consider 65 to be major resistance, and if, for example, the market rallies to 66, they consider resistance to be broken. This is nonsense. Support and resistance 
should be considered approximate areas, not pre­

   

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