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Occasional Musings from a Stock Market Timer
Human Psychology Moves the
Markets
Price Floors and Ceilings Play
a Big Role
Markets Trend and Do Not Walk
Randomly
These Mathematical Tools Help
Spot Turning Points
The Golden Number
Pattern Recognition
and Timing Signals for Stock, Futures, and FOREX Markets Superior Charting Software for the Serious Trader
Simple Longer Term Approach for
the Average Investor
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Support and ResistancePrice floors and ceilings occur all the time in the markets. They can be observed in all individual stocks and indexes. They are of great importance as the penetration of a previous price floor (support) or price ceiling (resistance) is often a very significant event with huge implications as to future price movement. Support and resistance levels are used primarily as risk management indicators. As prices move they tend to fluctuate between support and resistance levels. Stop orders are often placed near these price levels. For more on how this works see Risk Management. Support and resistance also aid with timing signals as they can act as confirmation of a signal.
For example, the S&P 500 ETF (SPY) has been declining in value for weeks and appears to find a bottom at about the $114 level. The chart shows us that the index has bounced of this level many times in the past highlighting its importance. Many factors have lined up and our system generates a buy signal the next day. Our entry point is at about $115. We initially set our stop just below support at say $113.80 (that extra 20 cents allows for a little wiggle room). This will protect us from larger losses should the $114 level not hold as the failure of a significant support level often means further declines as the index searches for a new support level. The market does continue upwards but pauses at $118 and then drops to $115. From here it continues back up to $118 and pauses again. The next day the market surges and gaps above $118, so we re-adjust our stops to $117.90. This will preserve $2.90 worth of profit should support fail t $118. The market continues to run for a few weeks and pauses at the $122 level. We see that this level acted as resistance in the past. We tighten our stops to just below $121 and sure enough the market needs to cool off a bit, triggering our stop. It then proceeds to drop the previous line at $118. Here it presents another opportunity for a trade.
The purest, most accurate trading signals
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TheMarketTimers.com provides introductory information to
the techniques used for stock market timing. Trading stocks,
currencies, or any security
involves risk. The stock market timing techniques shown on this site can
help control the risks involved in trading. Though these stock market
timing and charting techniques are very helpful for some traders, they
require experience and knowledge of market behavior that comes with
practice. It is advised that traders use
risk management and set loss limits on every trade.
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