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I would agree to generalise support and resistance is probably not wise. A
line is just a line (unless its not of course). There are many many ways
of establishing a potential support/resistance/pivot area, many of these have
merit. As you say below 'support' does not neccassarily mean that prices will
reverse and go up.
What may happen is:-
nothing - prices just continue
prices may immediately reverse
prices may pause then continue
prices may pause and reverse
there may be a mixture of the last two (reverse re-test and break).
This is pretty similar to reinar's observatins below.
Suport and resistance tend to correspond to a price 'extreme' where the
crowd think there might be new 'value'. The buy support guys (buy
value) will be buying, the break out guys will be selling the other way.
Anticipating whether the 'line' will hold or break is the art, chart reading
(patterns or raw price behaviour/tape reading) or to a lesser degree TA can
help. Probability is another way of aproaching it.
Cheers,
Nick.
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=reinar2020@xxxxxxxxx
href="mailto:reinar2020@xxxxxxxxx";>reinar2020
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Sunday, July 07, 2002 1:20 PM
Subject: [RT] Re: Bear Market ?
Ira,To generalize the concept of support and resistance
can ruin trading.If you are using Andrews lines ineffectivly you can find
at least 30 lines for tomorrow.Thats why I like the idea of there
being three types of sand bars. We have identified three different
types. a) ones you can sail over, ( after prices sail over them you can
put on a trade with low risk as prices come back to the sand bar....and
ride to the next sand bar)b) ones where you need to wait for the
dredger to come by. In this case a pivot is made prior to the sand bar.
Then as prices pass through enter the trade with a stop on the other
side.and then there are c) the rocky reefs...these typically have
markers on them....Pivots you see on the chart later. Being able
to know the kind of sand bar that the prices are sailing near is very
practical because they also provide points to take action and what kind of
action to take. When there are no sand bars or changing winds the water is
deep enough for the sailors to relax until the next sand bar or change in
wind.R> I thank Mr. Baker for his
explanation of how probabilities are arrived at.> In this case the
ratio is 3/1. As for support and resistance. The words>
are self explanatory. They do not say top or bottom. With
support/> resistance areas price is expected to stop there temporarily
and one should> exit a trade at that point and wait for their
system to tell them it is time> to re enter a trade. Whether
it be trend or contra trend. Support levels> are supposed to
be bounced off of as are resistance levels. No one said> that
either is the end of a move. My system provides and entry
price and 2> support/resistance price levels and a target.
All I expect at each level is> a retracment in price and the
ability to re enter a trade once another entry> price is
given. Many times the trade is in the opposite direction,
contra> trend, rather then with the trend. As trend is self
determined, your bear> market may provide my bull trade and
vice versa. The Nasdaq, OEX, S&P and> the INDU have
done exactly what they were supposed to do based upon the> chart
information. Are support/resistance levels specific prices,
no.> They are price areas. Momentum will often carry
price through a support> price before it returns, a spike
down. Or price might not quite reach a> resistance area due
to pressure. that is what indicators are used for. You>
don't need a statistics background to figure basic probability. Just
take> each trade presented by the system and add then together then
divide that> into the number of times price has actually reached
the projected price.> That will give you a percentage of
accuracy. The more data, the closer the> degree of
accuracy. There is a difference between probability, degree
of> accuracy and odds. In rolling dice. The odds for a 12
or a 2 are 36 to 1> each time you roll the dice, but each time
those numbers don't come up, the> probability of it happening is
far less then the odds. The houses edge,> they pay
30/1. Because heads or tails is even money doesn't mean that
you> couldn't get 10 heads or tails consecutively and defy the odds and
the> probabilities. The saying still holds, numbers don't
lie, but liars use> numbers". One can make the numbers
do anything they want, just look at> corporate financial
reports. That is why TA works and Fundamentals has its>
flaws.> > ----- Original Message -----> From:
"jeff97_98_1998" <jprroth@xxxx>> To:
<realtraders@xxxx>> Sent: Sunday, July 07, 2002 7:03 AM>
Subject: [RT] Re: Bear Market ?> > > > Not
Joking,> >> > How does one compute a 60% probability of a
market level> > being achieved? And in what time period? And
with> > what amount of drawdown?> >> > Why not a
100% probability, given enough time?> >> > What is used to
forecast probability?> > I flunked statistics and probability in
school,> > so this subject is quite confusing to me.>
>> > Also about support and resistance.> >> >
How many support levels has the Nasdaq violated> > since 5000?
So where was the support?> > If you breach 10 support levels, and
bounce off the> > eleventh, does that prove support levels
actually> > are tradeable?> >> > thanks,>
>> > jeff> >> >> >>
>> > --- In realtraders@xxxx, "ira" <irat@xxxx>
wrote:> > > Some interesting things have occurred on the charts
with Wednesday> > and Fridays numbers. There is nothing in
price that has voided the> > down trend in the indexes and the
rally prices are due for a> > retracement, but I would be careful
about going short into a> > retracement of this rally. There
appears to be a 60% probability> > that the Nasdaq composite could
get to 1500, the 100 to 1170, the S&P> > to 1050 and the DOW
to 10,000. There are some strong resistance> > points prior to
reaching these numbers, but they are there. So, if> > you
are going to short the first thing on Monday, it may pay to have>
> a safety net somewhere. Good trading, Ira.> >>
>> >> > To unsubscribe from this group, send an email
to:> > realtraders-unsubscribe@xxxx> >>
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