The market can react to support or resistance in various ways …
As you go through technical analysis training, here are some patterns that we can often observe when this occurs in the market .
One that we may refer to as touch and away as if the market is reaching, reaching, reaching for a certain level of support/resistance , and once it comes close, it reverses suddenly and retreats , like there suddenly was released some built up pressure . An exhaust is what this is . This is a formation where there is holding of the resistance level. This is a pattern that seems it is trying to break on through , by worrying the level of support or resistance like a dog and his bone, but it fails , it does no break on through, and then the market makes a turn in another direction .
Yet another way that support/resistance is able to give way is when the prices pop up through the level of resistance that is anticipated and go up even higher . The gap, known as a “pop” can occur quickly and may surprise a trader . With today’s markets that are 24 -hour and the trading platforms that are electronic there are fewer gaps like this that occur because there is continous overnight trade and there is not a long time without trading . Nevertheless gaps can still occur , and we need to know how to trade them . The thing to keep in mind in your technical analysis training course is that after it is broken, support can turn into resistance and resistance can turn into support. Usually the previous support and resistance will be tested by the new prie level and will then go on towards the pop .
The third major way that support and resistance breaks down is that prices simply slice through the anticipated barrier as a knife cuts through soft butter, as if there were no support or resistance there at all …. and this really is what happens. Price quickly scoots right on through . This is most often seen when on one time frame we anticipate support or resistance but on a higher time frame there is nothing that backs it up . One example is that if resistance is seen on the daily but to that point the weekly chart shows nothing – we should keep our eyes open .
This is a point that is so important when it comes to your technical analysis training course – when in reality, the phenomena you believe is there, really isn’t. This is a particular situation where support is showed by the technical analysis of the lower time period , but it does not exist in the real world , or even if it really exists it is only weak or slight and has little or no effect on the market . The trader that is multiple time period will see the situation because no higher time period tools setting up the area will be there. The good news is that it quickly can be seen and you quickly can figure out that this is a pattern that is negative and that that there is no resistance/support in that area .
