Elliott Wave InternationalmyEWISocioniomics.Net
Home > Trading Lessons

3 Ways to Identify Support and Resistance – 5 Chart Examples

By Editorial Staff
Tue, 30 Dec 2014 17:15:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly

Today's lesson considers three ways to identify price support and resistance in the markets you trade.

1) Previous highs and lows
2) Trendline support
3) Fibonacci Ratios
 
These examples are adapted from Jeffrey Kennedy's Trader's Classroom service. You can access lessons like this when you subscribe today, risk free >>
 
1) Uptrends terminate at resistance while downtrends terminate at support. Previous highs and lows often act as resistance and support.
 
In ALCOA Inc (AA), the September 2012 selloff found support near the previous July 2012 low.
 

 
The February 2013 peak occurred following a test of resistance at the January peak at $9.33. 
 
2) Trendlines offer resistance and support for prices.
 
The 2008 advance in Gold found support numerous times near the trendline that connected the lows of the move, as you can see below:
 
 
Conversely, the trendline connecting the highs of Wheat's 2012-2013 decline provided resistance for countertrend price action.
 
 
 
3) Fibonacci ratios also identify resistance and support. As Elliotticians, we often look at retracements, the most common being .382, .500 and .618. In Akamai Tech, Fibonacci support ignited the July and November 2012 rallies:
 
 
In the same chart you can also notice how Fibonacci resistance in AKAM halted the July 2012 and February advances.
 
 
From straightforward examples like these 5 charts, to detailed instruction across all markets and time frames, Jeffrey Kennedy's Trader's Classroom service equips you to make more confident forecasts -- with 3 to 5 video-based trading lessons each week.
 

For more free trading lessons on trendlines, download Jeffrey Kennedy's free 14-page eBook, Trading the Line -- 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. Download your free eBook.
 
(Already a EWI Subscriber or Club EWI member? Log in now to access your free 14-page eBook on Trendlines)


© 2015 Elliott Wave International

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.