Does Support and Resistance Work?

[adityasaraf007]

Aditya, I have been following yr thread and your interpretation of Price Action around these S&R Levels. IMHO, your interpretation is pretty good as analyst.

Feeling elated hearing this.

Would be interested in seeing, how you trade them cause as a trader, it is important to make entry/exit/no trade decisions.

I don't plan to do Realtime Trading anytime soon...... We still have a long way to go......... However, I do take some scalping trades in between......

For real time trading, a tip from my side, will be to adjust these levels for latest condition by converting a level, into a zone.
eg - when point 24 was made after breaking the yellow line, that becomes a latest reference point.. See how price found resistnace at that level today (between 11 to 12) and did no goto yellow line. You will find similar situation on point 13 and 16, 15 and 17 where new PH/PL are slightly off these red and yellow lines

I will try to incorporate this in my analysis........ Would request you to please point out if I miss out on this in the coming posts... Actually, the reason I post Two Trading Sessions Chart (Current Day and the Previous Day) is to identify those reference points...... However, I didn't do it till now........ Thanks for pointing this out to me.....

With regards,
Aditya

 

[adityasaraf007]

Okay, now that we have gained some confidence about our reading of Support and Resistance........... let's move on to the next Stage......

Until now, the analysis was just about the waves and how they react to the S/R levels. Now, let's take it further by analyzing the candles within that wave........ the analysis would become a little more specific and how we would have reacted to them in Realtime. We would still be analyzing them on EOD Basis though........

We would also try to formulate the Buy/Sell Decisions and the Stops that should be appropriate........... There might be some inconsistency initially as we are just trying to figure out the Appropriate Places of Interest and everyone is requested to kindly bring those inconsistencies into the picture.

I hope that I am moving in the right direction.......... If you think otherwise, please post your concerns........

Seniors and newcomers......... all are requested to join the party.........

With regards,
Aditya

 

[kevin_shah]

Hi Aditya...
I m a follower of Support an Resistance "zones" and also a silent follower of ur thread...
Just surfing through the net has some interesting veiw points on S&R from a blog
Thought this the best place and TIME to put those veiw points here...

The Author says:-
Just like every car has "crumple zone" - a criss-cross webcage of joints and steel members which bend and absorb the energy generated by the impact in case of an accident stock market charts too have crumple zones in the form of supports and resistances.
Whenever there is an accidental or incidental fall or rise the tremendous energy generated is absorbed by at these support and resistance points as a result of which a free fall or free rise is prevented.
This acts as a safety system for those who are caught on the wrong foot.
Whenever there are no support or resistance levels between two points expect destructive energy to land on the traders caught in-between!

So, those who have nightmares about "circuits" can take some heart from these crumple safety zones in the stock market.

BUT, remember, when you see yourself saved by the crumple zone in front of your nose, treat it as time given to you to eject. Crumple zone chain reaction may finally stop only after you!

Check your stock or index for these today!

Thought this could be a Fitting conclusion on ur analysis
Best of luck for ur next venture
KEVIN

 

[DanPickUp]

"Crumple zone"

In trading we can call them : Meeting zone.

Buyers and sellers meet here.

 

[adityasaraf007]

What a day we had........ I have lost all my confidence...... not because of money........ I have a very small portfolio........ So it didn't affect my portfolio too much..... But because of today's event........ and the fact that all of it happened within a very short time........

Would come back later on and give a try to analyze the markets today......... It's going to be very very difficult for me........... Nevertheless, would give a try for sure........

However, I did mark two major S/R Lines (Red) yesterday........ But couldn't update in the morning due to Internet Connection.....

- One around 5265 and another around 5195........ These are visual Pivots on 47-min Chart.

With regards,
Aditya

 

[adityasaraf007]

Here's the 5-min Chart of Minifty for June 20:

29. Price Opens without any Gap just around our Minor S/R of 5366 and starts sliding down with average volumes. Just a few points remain for it to touch the major S/R of 5330, but it gives a Green Candle and again starts falling to touch and break the major S/R of 5330 with huge volumes. As the momentum was too fast, let's say we were able to Short at 5310 with SL of 5340 ie; just above the major S/R and with an initial target of 5265 (the major S/R marked in red).

30. However, because of momentum we would have certainly been able to carry it till the next major S/R around 5195. It made a low of around 5183 to touch the major S/R, and because of reversal we would have certainly got out of the Short position around 5210 to be on the conservative side. So, we would have been net positive by +100, while the difference between two major S/R was 5330-5195=135 points.........

The same candle forms a big hammer and closes around 5245. Next few candles reach our S/R area of 5265.

31. Small candles, in the present context, forms Doji, then Gravestone Doji and again a Doji-cum-Hammer and the other few candles play around our S/R of 5265. Everything with average to low volumes.

32. Two consecutive Green WRB. The first one with just about average volume and the next one with volumes similar to the fall. But in Realtime, after the fall, I didn't had guts to enter a Long Position and actually, I was waiting for 5330 which never came.

The next four candles are Red with Lower Low and Lower High and Diminishing Volumes. On 15-min Time-Frame we have a Gravestone Doji, with High of 5313, Low of 5276 and Close of 5290. Since, the major S/R of 5265 war round the corner, RR was not in our favour and we did not want to take the Short on the break of Low of Gravestone Doji. Next few candles consolidate within the range of 5280-5300 with low volumes.

33. The two red candles break the range and reach the Support with low volumes. Then the candles start consolidating above our Support between the range of 5265-5285.

34. From here onwards, price remains on the lower side of S/R of 5265 and hovers around 5250-5265 till the end of the day. The day closes around our S/R of 5265.

I have tried to give an unbiased overview of how would I have traded this today, had I been in my senses during the Market hours. I had come around 10:10 and switched on CNBC to watch the level of Nifty, it was 70points down around 5295. I said Ok.... Went to the kitchen to get my breakfast........ when I came, the markets were 140points down around 5220. I rubbed my eyes to watch market go another 10points down...... I knew I had missed the move. Switched on my PC to open the terminal, it had already recorded the low of around 5182 and was trading around 5230. I had already lost my senses and didn't knew how to trade this market.

I have a small portfolio...... so the damage was not huge......... it's just 500-600 Rs... which I can easily recover.......... But it has damaged my confidence........ I know this would have not been the case, had I been able to catch this Down Move...... which I know I would have........ had I been able to come earlier......

Anyways, the positives are........
- I kept my calm when not in my senses by not trading during the day :lol: .........
- Our S/R did work like charm even on a monstrous day like this..................
- We are not going over the top and trying to do an unbiased analysis.........

By-the-way, have a look over here to know how ST Sir traded this day.....

With regards,
Aditya

 

[adityasaraf007]

Here's the 5-min Chart of Minifty for June 21:

35. Price Opens with a Gap Up of around 10points. Next few bars give a Lower High – Lower Low (LH-LL) formation and reach our Support of 5265 with a Hammer with good volumes.

36. Next bar does give a down Close, but it doesn’t take out the Low of Hammer and Price starts moving up after taking the Support…….We should have gone Long above the high of Hammer around 5275 with SL as Low of Hammer around 5255. Price starts giving us Higher High – Higher Low (HH-HL) formation. Volumes were just about average…… As the move was Steep and Price did take out the High of the Day, we should have kept on trailing the Stop to the Low of Previous 2 bars……..

37. Price gives us an Inverted Hammer with good Volumes around the Visual Pivot of Yesterday marked as 32. Time to get alert…… Next few bars consolidate within the range of 5295-5310, our SL stands around 5290, ie. the Low of the bar just before the Inverted Hammer.

38. The red candle breaks the range but our SL is saved by a few points. Now we get a Smallish WRB with decent volumes which breaks the High of Yesterday’s Visual Pivot marked as 32. We should move our SL below the low of this bar around 5296…….. Next few bars retrace back.....

39. Price takes the Support at SMA20…. Gives us a smallish Doji with low Volumes and starts moving up………. We get a series of small candles….. We trail the Stop to 5299 ie. the Pivot Low where it took the Support……

40. We get a Green candle with Volumes which is within the touching distance from our Major S/R of 5330….. We trail the Stop below this Candle around 5310…. Now, price starts consolidating below our major S/R of 5330 within the range of 5313-5325 all with low volumes…… We may either book our Profits during this consolidation phase or wait for our SL to get hit…… Since our SL is not too far away, let’s wait for it to get hit….

41. A red Candle with decent Volumes……… SL hit….. Long Position closed at 5310…….. Gross Profit of +35…… We do not open a Short Position now….. Let’s watch the next few candles…… We are also near a psychological figure of 5300…. Next few candles consolidate within the range of that red candle and then we get a Hammer with Volumes…… It also gives a low below the 5300 mark at 5296 but closes around 5302…… We would short at the break of Low at 5295 with a SL of 5316….. the high of the red candle marked as 41.

42. Our Short Order fills up and the price starts moving higher….. within the next four candles, prices reaches 5312.

43. We get a big red Candle with Volumes…. Within the next 3 bars, prices reaches our S/R of 5365 and gives a Green Doji….. indicating it would take the Support over here…..

44. We exit our position in the next candle with around +20points Gross Profit…. We end the Trading Day around here and just observe the next few candles till the Closing Session. Price consolidates till the end just above the S/R of 5265…..

I would request everyone to point out any irregularities, if any...... and if the entry, exit and SL seems correct and unbiased........

Today was an IB but I won't read too much into it as yesterday was a massive range day....

With regards,
Aditya

 

[adityasaraf007]

Here's the 5-min Chart of Minifty for June 22:

45. Price opens Gap Up 20 odd points and then gives a straight down move with LH-LL formation to fill the gap……… Volumes were below average.

46. Price starts reversing from here…….. I don’t know if we can call this the effect of major S/R Line or not as Volumes were quite low during the Up-move too…. We don’t take any trade over here because of Low Volumes…..

47. Price faces resistance around yesterday’s Pivotal Area marked as 38, 39 and 42…….. We get a Hammer with low volume; the very next candle takes out the High of the Hammer and starts sliding down in LH-LL fashion…. All this while the Volumes were very low…..

48. Price takes the Support around yesterday’s Close…… Next few candles try to move up but retraces back to this area…..

49. Price again tries to go up…….. This time we get some Volumes…. Price sustains yesterday’s Pivotal area and starts moving higher….. We don’t have any trade over here as Price is in the middle of two major S/R and the risk is too high…….. Let it reach one of the S/R for our trade to trigger……

50. Price breaks the High of Today and sustains for a few candles but then starts sliding down….. but with low volumes….. We again have the same problem……… We are in the middle of two major S/R and risk is too high for a conservative trader….. So no trade for us…..

51. Reaches Yesterday’s Pivotal area and consolidates for a few candles and again resumes its Downward Journey…….. This time we get to see some Volumes in action….

52. We get a big red candle with Volume……. Low of the Day broken…….. It’s within the touching distance of our S/R….. Let’s get ready…….. The next candle is a Doji with just about average Volume…… We see that price has been taking Support over here for the past two days…… Let’s buy over the High of Doji ie; 5275 with SL just below the S/R Line at 5260…… We are in the trade and Price starts moving higher and the Volumes are average………

53. Oh no…… Price facing the hurdle at SMA20…… Okay, we have our SL intact…… In the next few bars, price comes to our Buying Price and starts consolidating over there….. Volumes are below average…… Now price starts moving higher………

54. Its Closing time…… Let’s wrap it up around 5287-5288 where it was facing resistance recently…. Overall, Gross Profit of around 12-13 points from the only trade of today……

Overall, a very range-bound session with volumes on the lower side for the entire day…… Price closes just around yesterday’s closing price. Today was an NR4 and IB as well……. Yesterday too was an IB, but we didn’t give much importance to it…… Now the question in my mind is….. Which day’s High and Low should we consider for the break of IB….. Today’s HL or Yesterday’s HL…… Let’s observe both the Setups……..

Today’s HL 5312-5267
Yesterday’s HL 5326-5256
So, Yesterday’s HL represents our Major S/R Lines……..

Criticisms invited…..

With regards,
Aditya

 

[adityasaraf007]

Here's the 5-min Chart of Minifty for June 23:

55. Price opens Gap Down around 10 points and takes the Support of our major S/R around 5265 and sustains this level for a few candles before moving up….. Volumes are average to Low….. Our thinking about trade during this consolidation phase should be that:

For Short – If it breaks the Low of 21st June ie; 5256, we would short at 5255 with SL just above our S/R (Remember yesterday was the 2nd Consecutive IB)…..

For Long – Break of Today’s High ie; 5280, with a SL just below S/R around 5260………

In the next few bars, Price takes out the High of Today with average Volumes…… We are in Trade…… Price starts moving higher…..

56. Oh….. Price again starts facing the hurdle where it was facing yesterday marked as 53 and 54…. Okay… we have our SL intact….. Let’s see what the future holds for us….. Price begins consolidating in the of 5290-5283 with low volumes…..

57. Price breaks the hurdle with more than average volumes…… Candle forms the shape of Inverted Hammer…… Let’s get alert…… We trail the SL to Breakeven which is also the low of the consolidation phase during 56; ie; SL now around 5282….. Next few candles are small with low to average volumes – consolidation going on….

58. Again breaks the high with decent volumes…….. Looks like we would have a good trending move…… Trail the SL to 5294; ie; low of the consolidation phase during 57.

59. Price again breaks the high with good volumes…….. reaches around 5320…….. This is the area to get alert because price has been facing resistance over here for the last few days…… Our major S/R is also not too far away…… We also trail the SL to 5301…….. Now, similar sort of consolidation going on within the range of 5312-5322 with low to average volumes….

60. Price again breaks the high of the day with good volumes and again forms an Inverted Hammer which is facing the resistance at our major S/R of 5330…… Time to get alert……We trail the SL to 5312……..

61. Similar sort of story…… High of the Day again broken with decent volumes and price again forms an Inverted Hammer…….. Though this time around, the Candle closed around our S/R of 5330….. We trail the SL to 5320…….. In the next few candles price slides down with average volumes and takes out our SL….. Long trade closed with around +40 points Gross Profit…….. But wait….. we are also looking for a Short over here because price had a U-turn from our S/R of 5330……..

62. We enter short around 5317 with SL of 5335; ie; just above the S/R of 5330…….. Next few candles, price slides down with low to average volumes and reaches 5307…..

63. Price starts inching higher, but volumes are low…… reaches around 5318 and then again starts falling…..

64. We get a big red candle with volumes…. Price makes a low of 5295…… Trail our SL to breakeven or 5318 ie; the last swing high…… Price again starts moving higher….. with low volumes….

65. It reaches 5314 consolidates for a few candles and then takes our SL…… Short trade closed with Breakeven to minor Loss………. Gross Loss of -1 point…….. Thereafter, price just moves in the range of 5310 to 5322…..

Would continue later at night…… have to go………

With regards,
Aditya

 

[adityasaraf007]

Continuing from the previous post to include IB Trade Analysis:

Had we followed 22nd June's High & Low to trade yesterday......... Our SL would have triggered for the Short Trade and there would have been a Gross Loss of -45 points........

If we would have followed 21st June's High & Low, which more or less represented the major S/R Lines..... then the Short Trade wouldn't have triggered........ However, it did trigger the Long above 5326. As the SL for Long would have been around 5256, which didn't come......we would have had a Gross Loss of -6 points, if we would have closed this yesterday itself...... Since, SL for this has not been triggered, let's carry it forward and we would close it today.........

Overall, if we complement our S/R Studies with NR and IB Day's and don't rely blindly on High & Low of NR and IB Day's that would be much better as was evident yesterday..... Let's observe this going forward......

As always, criticisms and opinions invited.....

With regards,
Aditya