Price Action: How To Draw Support and Resistance

In market movements, prices move according to demand and supply. There are certain points where prices seem to bounce off. These are called the support and resistance points.

In this lesson we are going to learn how to draw simple support and resistance lines.

There are two ways to draw your support and resistance:

1. Drawing the line exactly at the high/low of the bar.

2. Drawing in-between the shadows of the bar.

The first is usually the basic where it will show simple points of support and resistance. As markets are not always exact as banks will try to flush you out of your stop-loss, there will be instances where the shadow of the bar will extend out of their support or resistance. Hence we will look at the middle points where the line is in-between those shadows of the bars.

Drawing support and resistance can take quite abit of skill and practice. But it is the basis of price action trading where you'll see areas of price reversals. The higher the timeframe, the stronger the resistance/support will be. Try drawing those support/resistance lines in your chart in different timeframes. You'll find some lines are far more significant than others. Hence you do not need to draw so many lines at all!

Till then, good trading to all!

Weekly Review: 22-26 April

Forex

Eur/usd is still consolidating. The direction is still unknown yet though it is likely to be bearish. Eur/jpy dropped for the week. We are uncertain on its direction as its showing conflicting signals. JPY crosses went down for the week. Aud/usd is looking bearish, when it breaks, more will short as it has been consolidating for quite a long time.

Gbp/usd is looking bullish. It just hit a first resistance. So we will see if it goes further on.

Eur/Gbp is moving bearish also. A good short if you think EUR is weaker than GBP.

US Stocks

Dow Jones Index still consolidating.

Is it good time to short Pharmaceutical stocks? There have been many gap down openings for Pharmaceutical stocks after impressive rallies.

Singapore Stocks

Breakout for Capitaland. Further rally?

Genting has a strong rally.

What Do Bubbles Look Like?

What does a bubble look like? According to the "Bubble Model" by Jean Paul Rodrigue, there are 4 phases of a bubble: Stealth, Awareness, Mania and Blow-off.

Now let's take a look at the Gold Chart.

Looks eerily similar doesn't it?

Read more about the article here.

The Weekly Review

Extremely volatile week again, Eur/usd looks for a bearish turn while the Yen is pushing the Euro up. Aud/usd had a nice drop following that large pinbar. We shall see the new week if Aud/usd will breakdown or again push up which is very frustrating for trend traders. Eur/Jpy will be tricky also esp when there is the pinbar but sentiment is still bullish.

Commodities

Gold has given a dramatic plunge (Hurray for gold bears!) Now it has hit the fibonacci support at 38.2% forming a pinbar. Buyers came in to buy physical gold when news reported of gold becoming cheap. This comes to mind, are we looking at a correction or the masses are just chasing fool's gold?

The Weekly Review

Friday ended with some big movements. EUR/USD seems to have touched its weekly resistance while EUR/JPY had some pullback. On the weekly, EUR/JPY seems to have another potential of moving further up. AUD/USD will probably still in a limbo. We will see how will they unfold in the coming weeks.

US Stocks

Dow Jones Index continues its rally.

Singapore Stocks

Potential further upside for Kepland?

Mapletree Logistics is still rallying at a crazy rate.

Commodities

What made Friday the hottest topic that every trader was talking about was the price of gold. Gold was hovering on its support till probably some big bank sold big amounts of gold causing the breakout of its strong support. Gold might rebound and test it's new resistance. If it fails to break up, then I guess gold value will continue to fall and normalize, in the worst case senario at $1000.

Gold crashing

Bye bye to gold value?

Growing as a trader

Every trader has its own beginnings, his/her excitement, failures, frustration and fulfillments. But most of them go though the same stages where they grow into successful traders, or give up trading in the end.

Beginner Stage:
I started like every one else does, hearing about people making money from the stock market. So wanting to earn more, I started picking up books to read. There are so many books out there talking about investing, picking value stocks, how to calculate PE ratio etc. It got me excited. So after gaining all the knowledge, I went to open a trading account, made many calculations to find the valued Singapore stocks. Found a few, so I bought a few to try it out. What did I buy? Most of them penny stocks which I thought they will be gems cause they are really undervalued according to my calculations. In the end it did not rise as much as I expected, instead they all went down. I was invested during the peak of 2007 and the beginning of the biggest stock crash. Like a all emotional suckers, I held and held and the prices went further down. So I gave up and cut losses. Not a good start. Next tried another stock which seems to have a good value. Bought it and also came down. Everything crashed when Leman Bros. crashed. Pretty burnt.

Next stage.......... stay tuned.

The Weekly Review: Making Yen Cheap

We had a very big rally this week thanks to the BOJ. JPY crosses were explosive. EUR sets for a comeback while the AUD/USD looks bearish. AUD now looks stuck at the support waiting for the breakdown. USD/JPY might continue to rally as it broke out of the high.

US Stocks

Seems the Dow Jones Index fell last night and recovered. Still stuck in a consolidation range.

Has Amgen finally reached the top?

Singapore Stocks

Singapore stocks looked very weak on Friday with most stocks plunging down.

Genting on the lifeline.

Properties looking weak.

But REITS are still going strong.

Commodities

Gold had reached its major support and rebounded.
Let's take a look at the weekly.

Will gold rebound? Or will it breakdown and cause a gold panic?