Identifying the support and resistance

[dbphoenix]

this is ford motors company daily chart.

you can see the bullish trend line in the begining of the move.

once that was broken I shorted the first batch.

If the price would have gone above 9.25 with high volume I would have gotten out of the position.

in this case i could have strengthened my position but didnt (dont know why I guess I just dont trust myself enough yet with the trading systems)

point 2 was the point where the support broke with high volume.

in the last trading day (friday) when the price went back to check out the resistance I shorted another batch.

I'd be happy to hear what you guys think

thanks a lot guys for your info and great discussion

Did you short for no other reason than that the trendline was broken? Or were you also incorporating the potential S&R created in April/May '05 and January '06?

Db

 

[thebull27]

you are reffering to point number 1.

at that point I sorted only because the trend line was broken.

at point 2 (where we are today) I shorted because the price came back and looks like it stopped at the resistance at that point

Did you short for no other reason than that the trendline was broken? Or were you also incorporating the potential S&R created in April/May '05 and January '06?

Db

 

[thebull27]

today was a bit unexpected

if price will go up again tomorrow I will close my short possition

 

[barn_burner]

hi fellas Im new here in this forum.

I have been trading stocks for a while and so far with small success. The key, I believe is recognizing the real support and resistance levels and having a resonable take profit.

do you guys have any system to recognize support and resistance levels and determining the take profit levels?

You are correct about this, and I agree with what someone else said about not using trendlines for entry points as they aren't support and resistance. You might want to have a look at Tradesight.com, as he teaches exactly what is being discussed here as it relates to the US markets. And for anyone in the UK, it costs only about half as much!

Barn

 

[donbright]

hi fellas Im new here in this forum.

I have been trading stocks for a while and so far with small success. The key, I believe is recognizing the real support and resistance levels and having a resonable take profit.

do you guys have any system to recognize support and resistance levels and determining the take profit levels?

Most newer traders are generally confused about support and resistance price levels. In many cases, these price levels, and the subsequent "trading range" is simply a matter of dividend yields. For example, if a stock is returning 5% at $20, not bad...but when that becomes 2.5% at $40, not very good....so start with looking at the dividends.

Secondly, look at the historical volatility of the stocks to determine standard deviation moves, both longer term and intraday. Take price x historical volatilty (based on an average of 1 year, 6 month and 30 days, with possible trending in one direction or the other), and divide by the square root of time (19 for annual movement, of course)...this will give you one standard deviation, which occurs 67% of the time, double that for 2 std. deviation (95% of the time)...

Sounds complicated, actually very simple... these are called "Bright Bands" and can be found at trade-ideas if you have an interest.

Hope this helps a bit...

Don
www.stocktrading.com