Support and Resistance: Video 19 A, B, C, D & E

Question 1

Define Support

Answer 1

A price below the market where buyers might be stronger than sellers.

Question 2

Define Resistance

Answer 2

A price level that resists rallies. When the market goes to a certain price and sells off.

Question 3

Support and Resistance are also called _______________. Why?

Answer 3

Inflection Points
Because when price gets to a support or resistance level, it can either Breakout or Reverse. The market is making a decision whether to reverse or resume.

Question 4

In a trend, __% of the time a strong bear trend will not stop at support (and a bull trend will not stop at resistance.

Answer 4

80%
Because the market has inertia.

Question 5

All trend reversals take place at support and resistance, like a measured move or trend line.

Answer 5

Question 6

Types of Support and Resistance

Answer 6

Moving Average is Support and Resistance
Trend Lines
Trend Channel Lines
Prior Highs and Lows
measured Move Projections
Round Numbers
Any type of support and resistance can be the most important on the chart. It depends on context and strength of the S/R

Question 7

This one is a little tricky, but….
Step 1: Find 2 points to draw a channel line on top
Step 2: Draw a parallel line below to see if computers are paying attention

Answer 7

Not sure I understand this well, but on Slide 14 of Video 19B

Question 8

Wedges rarely loo good, but enter on reversals from lines, if context is good.

Answer 8

Slide 15 Video 19B. Need to understand this more.

Question 9

The market is always paying attention to prior highs and lows, the result is…..

Answer 9

You get a lot of double tops and bottoms. Most are not exact, a lot or little above and below.

Question 10

Traders are looking for breakout tests all of the time. Traders will often see if there is a rally back to the breakout point. Breakout test.

Question 11

At the end of the month, the market often pays attention too….

Answer 11

Monthly support and resistance.

Question 12

At the end of the week, the appearance of the weekly chart is determined by support and resistance on the …

Answer 12

Weekly Chart. Especially the final hour of the day.

Question 13

On the previous months, what are most important?

Answer 13

The open, close, high and low of last month and current month
Traders will watch how the 5-minute chart reacts to support and resistance

Question 14

When trading the last day of the month, look for any nearby…

Answer 14

Support and Resistance

Question 15

True or false: Trading Ranges are Support and Resistance

Answer 15

TRUE

Question 16

Use 20 bar EMA and Support and Resistance

Answer 16

Question 17

A breakout above a double top with three pushes is a type of _______

Answer 17

Wedge
In the photo it was a also a Gap Bar
When you’re in a bear trend, the first time the market does anything opposite, you have to assume the reversal will fail.

Question 18

Round numbers are important for Support or Resistance

Answer 18

Question 19

Institutions sell a lot of options, so they want them to expire worthless. People buy options at round numbers. and put stops at round numbers

Answer 19

A round number is good for taking profits, or placing a stop.

Question 20

Once a stock gets reaches 90, it often cannot escape the magnet pull of 100. See slide

Answer 20

Question 21

Popular Moving Averages for Daily chart are 50, 100, 150 and 200.

Answer 21

You never know which MA will make an impact, but watch price action near it.

Question 22

More Support and Resistances are:

Answer 22

Trend Lines
Prior Highs and Lows
Measured Move Projections
MA’s on any time frame
More in the photo….

Question 23

In strong Bull Trends, “Buy the Close Bulls” do what?

Answer 23

Buy strong bull closes, betting that they are a sign of higher prices, even if there is a pullback first.

Question 24

The highest close of a bull trend, the becomes resistance and leads to a leg down in the new Trading Range. Why?

Answer 24

Because the bulls that bought that the high of the trend will sell out breakeven, and that adds to the selling pressure

Question 25

In a bear trend, if the pullback is disappointing (if the Buying Pressure is too strong), what do the bears assume?

Answer 25

Their sell the close bear trend has ended and the market is either entering a trading range or a bear flag. in either case, they are not expecting lower prices for the time being.

Question 26

True or False: Buy Entry Bar and Signal Bars lows are areas of support

Answer 26

True

Question 27

Whenever there are two resistance levels, the market often gets above one without reaching the other.

Answer 27

If it does, it might be a Trading Range. See Photo: 19E

Question 28

50% is the single most important pullback level

Answer 28

In a strong rally like this, bulls will place orders to buy at 50% pullback. Betting that the bear reversal will fail and bull trend will resume. The bull trend continues only it continues to make higher lows. Al starts the 50% at the tail bottom of a bar. Bulls buy with limit orders at 50%.

Question 29

50% pullback in Bear Trend is resistance

Question 30

The start of the biggest bear bar after 20 bars in a bear trend, the Top of the Sell Climax late in bear trend is resistance (Magnet)

Answer 30

Chances are the market is going to close the gap. Chances are price will go a little bit above the sell climax bar. Top of las Major High, late in bear trend is resistance

Question 31

What Moving Averages does Al use on the daily chart?

Answer 31

Simple Moving Averages 50 100 150 200

Question 32

Complete List of Support and Resistance

Answer 32

Some of these he says he doesn't use, like Band, Fibs (except 50%), Daily pivots

Question 33

At some point you get a break below the bull trend line. The first reversal down in strong bull trend is probably minor. So then market enters a trading range or a bear flag, not a bull trend. So traders buying the close are confident that the market will get back to the high. And will buy more lower down (since trading range breakouts fail and reverse). In a trading range, you want to buy low. So this increases chances that the market will not continue up above the high since bulls are selling out.

Question 34

You can use the breakout bar as bull/bear breakout bar as support/resistance.

Question 35

I don't understand this, but good to refer to: Al is saying that support is always a magnet. Here, the bear tried to sell below the bear bar. But it failed, so they bought higher. Price came back to the bear bar, and they can sell breakeven.

Answer 35

(Not sure how this works, because whenever I try to wait for price to come back down to my entry, it keeps going higher instead)

Question 36

Here again, but in this case he's saying, "The short worked at this price once, so I'll short again. (I don't think he's saying hold until price comes all the way back your entry, then sell again).

Question 37

The bottom of an entry bar and the bottom of a signal bar are both support.

Question 38

The Highest Close of a Bull Trend is Resistance

Question 39

50% is the most important pullback number after a bull leg. From bottom to top of leg, but 50% can be a close and not include tail. Bulls beat that the bear reversal will fail and the bull trend will resume. Because it dips just below 50%, traders with limit orders usually get filled. Also, the traders who didn't get filled, will buy the close higher and add to the buying pressure.

Answer 39

Al calls near the red cursor a Minor Trend Reversal. The next below it is a major trend Reversal.

Question 40

50% Pullback after a bear leg is resistance. So here they wait for a second entry sell. But who know how they know to wait. Al says it creates a wedge top on the third push up. Maybe after two pushes, you wait for a third for a wedge. Top of bear trend is stop. It continues to be a bear trend only if it makes lower highs.

Answer 40

Major Trend Reversals lead to a strong sell-off to a new low. So going above it could be a bear flag or a bull leg in a trading range.

Question 41

The top of the Sell Climax late in bear trend is resistance (magnet). Top of last major Lower high, late in bear trend, is resistance. Usually can't prevent rally from going above at least top of climax, and maybe even Measured Move up.

Question 42

The bottom of a buy Climax late in a bull trend is support. It's a magnet. Market usually gets drawn to it. Market dips a little bit below and you usually get a bounce. (Where cursor is)

Answer 42

Once selloff falls below bottom of Buy Climax, or last bull leg, the bull trend is over. Now either trading range or bear trend. Often leads to a Measured Move down (from top to bottom of the buy climax)