Support and Resistance In The Stock Trade

For a lot of beginners it is hard to recognize when you should buy and when you should sell. It can get really frustrating when you’re learning how to predict what a stock is going to do. That why we want to emphasize the importance of understanding support and resistance. This can be the difference of getting a big win or a big loss for that day.

My wonderful assistant coach in my stocks and crypto trading school John Balauat shares his wisdom today so we all can trade smarter and come out on top!

Support and Resistance

Support and resistance (S/R) areas are price levels that stocks have historically had a challenge breaking through.

Support is a level that the share price has declined to several times but is unable to continue to lower levels.

A resistance area is the opposite. It’s where a stock moves up and reaches a point where it has difficulty going higher.

These areas allow us to find a range that a stock can move around in. Knowing these areas allow us to predict possible moves and create trading plans around.

Support and resistance areas are possible points for trend reversals.

How To Spot S/R Areas

Look for areas where buyers and sellers have the same idea in price.

The stock will “slow down” at these areas and the buyers and sellers will battle. The direction the stock will move depends on who wins.

Start with longer term charts (Daily) and then work your way down to shorter time frames. Longer time frames show stronger areas of S/ R.

Draw S/R lines in these areas with your chart drawing tool to help you see it better.

The main difference between strong and weak support/resistance levels are the amount of times we retest the area. The more we test an area and it holds, the stronger the support/resistance.

Trend Lines

A trend line is an angle the stock is moving in; whether that’s an upward slope with higher lows & higher highs, or a downward slope

with lower lows & lower highs. Stocks don’t go straight up nor straight down. Connec2ng low points/high points of a stock allows us to see if the stock is in some kind of trend; whether it’s going up (higher low) or going down (lower low) over time.

If we know the direction of the stock, we then can find the range it is playing in by simply drawing our multiple trend lines. Once we have found the range and the direction the stock is trending in,

we can now look for our best entry based off of all the different types of support/resistance. 

– John Balauat

Do you want to become a better trader? Come join our Stocks, Trading & Crypto group. We meet every morning at the trading bell so that everyone can learn faster and more effectively. We’d love to have you join us!