Understanding graphs Flashcards
what is a support level
a level where the price tends to find support as it falls due to an increase in demand for the asset. (because its cheap)
This means that the price is more likely to “bounce” off this level rather than break through it
what is a resistance level?
the price tends to find resistance as it rises due to an increase in selling interest. Again, this means that the price is more likely to “bounce” off this level rather than break through it.
How do you identify support and resistant lines?
with trend lines
What gives a specific level significnce?
The more support/ resistance levels are touched and bounced off the more significance given to the level
If a price breaks past a support level…
that support level becomes the new resistance level
If a price breaks past a resistance level…
it will find support at that point in the future
what are psychological support/resistance levels?
as price reach a value ending in 50 or 00 people see these as a strong potential for interruption in current movement. the price may hit the line and reverse or hover as bulls and bears fight for supremacy - or punch through,
what to do if a stock price moves between support and resistance levels?
buy a stock at support and sell at resistance, then short at resistance and cover at spport.
how do you know when a stock is coming out of a downward trend?
it finds support at the same point three times in a row, and starts to form higher highs and higher lows.
what is a pivot point?
high +low + close of previous day
Resistance 1 =
(2 x pivot point) - Low (previous)
Resistance 2 =
(Pivot point - Support 1) + resistance 1
Support 1
= (2 x Pivot Point) – High (previous period)
Support 2 =
Pivot Point – (Resistance 1 – Support 1)
If price is trading above the pivot point,….
market sentiment might be considered bullish for the day
