Support and Resistance Principles: Trading Indices
In this video, Richard Adcock, a Technical analyst at Corellian Academy, focuses on the principles of support and resistance in the context of trading, particularly when applied to indices, like the US Tech 100.
According to Adcock, the levels of support and resistance are determined by previous price points where buyers and sellers have been active. As such, support is the level where the market finds buying interest, while resistance is the level where selling interest emerges. These levels may affect future price movements.
In addition, sometimes support and resistance levels can be horizontal. In such cases, Sideways trading can be used whereby the market remains within this range until either buyers or sellers prevail, resulting in a breakout.
Since trend formation typically occurs after a breakout from a sideways range, the trend provides valuable context for analyzing support and resistance in a downtrend. This happens when price recoveries encounter selling pressure at lower levels, leading to lower highs and lows.
Moreover, traders may want to note that support and resistance levels can be identified using a variety of tools, such as trendlines, moving averages, Bollinger Bands, and Fibonacci retracements. To gain a comprehensive view of the market, traders may also want to consider aspects such as different time frames which can range from daily, weekly, and intraday charts.
For example, long-term support and resistance levels from weekly charts can influence shorter-term trading decisions. As such, considering support and resistance levels across various time frames is important to make well-informed trading decisions.
Another tool traders can use to identify resistance is the Fibonacci retracement levels. These levels can align with other resistance points, providing stronger signals.
To demonstrate how this is done and emphasize the importance of staying aware of long-term trends, Adcock analyzes a weekly chart of the US Tech 100 According to the analysis, lower highs and lower lows may suggest a bearish trend. Even on shorter time frames like the four-hour chart, the speaker emphasizes the significance of resistance points in the context of a bearish trend.
In conclusion, using support and resistance levels can help traders analyze market trends and identify potential entry and exit points.
