Support is the price level at which demand is thought to be strong enough to prevent the price from declining further.
Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.
Support and resistance are subjective.
There are a lot of Support and Resistance out there. I will go through some of them.
Horizontal support and resistance levels. This is the easiest kasi sa Arbitrage isang click mo lang mag aappear na ito.
Kung gusto ninyo naman na kayo mismo magplot ng support at resistance level madali lang din. Tandaan ninyo lang na support is the level kung saan hindi na bumababa halos ang price at resistance ay ang level naman na hindi na tumataas ang price. Subjective ang pag draw nito meaning walang tama or mali as long as hindi ka lumalabag sa concept/principle/idea.
Pwede ka magplot using body ng candle. Pwede ka magplot using wick. If you want to know ano ang body at ano ang wick read this.
BID and ASK SUPPORT and RESISTANCE ORDERS. Meron ding support and resistance sa bid and ask orders. Ito yung mga levels kung saan marami mga bids or ask orders.
Round Numbers Support and Resistance Levels. According to human psychology, round-number price-levels often act as support and resistance levels, as they can host a large number of pending buy and sell orders placed by market participants. Example nito are 1.0 pesos level,1.10 level, 1.20 level, etc.
TRENDLINE SUPPORT AND RESISTANCE. May tatlong trend ( uptrend, downtrend at sideways). Support and resistance levels can also form at trendlines and channels. If you want to know kung ano ibig sabihin ng trend read this.
Sa trendline support at resistance hanapin mo ang lowest points/candle ng trend and connect them with a line to form support. Pwede sa wick pwede sa body. Hanapin mo naman ang highest points at e connect mo with a line to form resistance. That’s the idea behind trendline support and resistance. Pwede ninyo e practice para mas maayos ang ang plot ninyo sa chart. I’m using my sister’s tablet sa pagdraw ng lines kaya medyu mahirap since nasa labas kami ngayon kumakain as I write on this blog.
DYNAMIC SUPPORT AND RESISTANCE. Moving averages act as support and resistance. Dynamic kasi the line moves as the price move. Kapag nasa taas ng candle ang moving average na line resistance tawag sa kanya at kapag naman nasa baba ng candle ang moving average na line support ang tawag sa kanya.
Meron din fibonacci levels of support and resistance but gagawan ko ng hiwalay na blog post yun soon kasi isang buong topic ang FIBO. Marami pang uri ng Support and Resistance pero mga common na ginagamit ay yang mga nalist ko sa taas.
Common strategies with regards sa support and resistance are the following:
- You buy at or near support and sell at or near resistance. When the price touches support levels but does not break it, the price tends to bounce back up. The opposite is true with resistance.
- When support is broken it becomes the new resistance. When resistance is broken it becomes the new support.
- You buy and sell on breaks. You buy when the price breaks resistance. You sell when the price breaks support.
There are a lot of examples available sa internet about these strategies so hindi ko na eh elaborate. You can just type it sa google and maraming result ang lalabas. Support and resistance yata ang pinakaclassic na idea sa technical analysis. Support and resistance can be a level or a zone. Example nito is pwede mo gawing support ang price na 50 pesos if doon nagfall ang support. Pwede rin naman na kahit 50 pesos ang support mo ay e consider mo pa rin ang 49.7 pesos as support dahil napapaloob pa rin ito sa zone or area ng support. Same goes sa resistance.
Now that I have defined/explained Support and Resistance let me give you my opinion about it. I only use dynamic support and resistance. I use ALMA as my moving average. I don’t believe in other forms of support and resistance. Many traders do but I don’t. Aside kasi sa moving average which is called dynamic support and resistance, sobrang random na ng iba. Sobrang subjective pa. The problem is that, everyone has his own way of drawing them, that’s why I think they are random. Where I might see a support, someone else might not be seeing anything there.
Remember that the market is the crowd and the crowd is often irrational. You can stand there rationally saying this level is important but the crazy people driving the market aren’t so rational and they don’t care.
You must care about what they care about, not the other way around. Alternatively you could be looking on the wrong time frame at the important level and maybe there’s a more important one further down the line that the market is running towards.
Unfortunately, you will find that support/resistance is in the eye of the beholder.
I have two stocks on my port. Lets see what the market will do by next week.
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