Support and Resistance Tutorial - Technical Analysis Day Trading

I start with these concepts because they need to betested).
understood in order to use the day trading levels thatIf prices quickly move back the other way through
I post each day. The following topics involve lookingthe support and resistance zone it just broke out of,
a chart of price history of a given financial instrument.then it is called a false breakout. In the example from
Support Levels are price points at which prices haveabove, if the SPY moved above $100, this would be
had a hard time pushing down through in the past. Ina breakout, but if it fell back below $100 and could
other words, a support level is a level where pricenot get back up to $100, then this would be a false
stopped falling. Often a support can be found atbreakout.
slightly different levels, for example yesterday pricesBy using support and resistance areas (when
moved down to $90 in the morning, later in the dayavailable), instead of just a single level, we have a
they went down to 89.90 before moving higher, thenbetter chance of picking levels to watch that have
near the end of the day price touches 89.95 andmore significance. The more times a price has been
then moves back up to close at 91.tested, but not moved through significantly, the more
In this example three support levels were created,important that price area is. If a breakout occurs
but together they can be used to describe a supportabove the top of a resistance area, or the bottom
area. Support areas have more significance than aof a support area, it is more likely a significant
single level because it shows the market has triedbreakout could occur. But as mentioned, these areas
several times to breakthrough a certain level, butare dynamic and may expand.
could not sustain it. In this case the support areaSupport and resistance occur on all time frames.
would be 89.90-90.00.These levels can be seen on a one minute chart
Resistance Levels on the other hand are price point inwhich may only show one day of activity or a
which prices have had a hard time pushing up throughweekly chart which could show many years worth of
in the past. In other words, a resistance level isdata. If multiple time frames show resistance at a
where prices stopped rising. Just as the examplecertain level, that level is likely very significant, for all
under the support levels section, resistance can alsotraders. Even a day trader can benefit if a breakout
form resistance areas.occurs on a weekly chart. They may not be aware
Resistance and support levels are dynamic, meaningof that level because generally they are only
prices may just edge past the old support resistancewatching the last few days or a week of price
level only to revert course. This new price is a newaction. A longer term trader may not be aware of
resistance or support level, but should be coupledwhy a major move occurred intra-day, but it could
with old support and resistance levels in the same arebe because of technical factors in a shorter time
to create a support or resistance area.frame when they were only watching their long term
Breakouts are price movements in which a supportcharts.
or resistance level is moved through. For instance, ifNot all time frames need to be analyzed, but it is a
the SPY has moved up to $100, but can not breakgood idea for all traders to look at time frames
above that price, $100 is a resistance level. When thelonger than the one they currently trade on to be
price finally does move above $100 it would beaware of larger forces that may be at work. If
considered a breakout. When price move up tolonger term traders are looking to enter or exit and
resistance or support levels, but do notthey want a good price it may be worth looking at
breakthrough, it is called a test (or a level wasshorter time frame charts.