In this video, we're going to keep it simple, we're going to talk about the most basic thing that
you will need to know and that support and resistance.
On the trading view platform, there is a line over here on the side, and if you click on this little
arrow, it expands the menu out.
I'll be using the horizontal line to draw support and resistance lines.
And you can see that if I click on the chart, it pops up.
There's a little bubble which allows me to drag it back and forth.
And you click away and it goes away.
So support, resistance, support and resistance are simply areas on a chart that buyers or sellers
cannot break through.
So if you can imagine a.
Or any financial instrument, for that matter.
Trying to break above this area here and failing that, is the market resisting price from going higher?
Market doing something like this and finding a level where we can't break through to the downside is
said to be supporting price.
So it's either resisting or supporting an uptrend.
It's based upon an uptrend, although it works in both.
So you can take this line and you can draw little areas, and the first thing that I would mention is
you can see where Price resisted, was resisted at this area here previously.
And a lot of selling pressure came in.
But when we broke above it, buyers started supporting the market right in this area as well.
And that's something called market memory.
So market memory is based upon.
And I'll go back to our example here of resistance, but it does work in both directions.
Perhaps sellers coming in at this level, two hundred fifteen dollars in this case.
And they continue to sell well, what happens when we finally break out?
Well, when we finally break out, there are a couple different groups of people that will be noticing
this.
No one would be the sellers who are losing money.
If the market comes back to test this area, they are willing to get out and perhaps even reverse their
position with a smaller loss than they would have had up here.
So they have an inclination to close their short positions, which means they have to buy the stock.
The other group of traders will be the people who missed the move entirely and are waiting for a cheaper
price to get involved.
What could be a move higher?
One way to think about this, an old axiom is what was once the ceiling becomes the floor.
So think of support and resistance levels on a chart like this and think of it perhaps as a cross section
of a high rise.
So if you're in the first floor, second floor, third floor, et cetera, if you go above this resistance,
which was the ceiling of the first section, it should now be the floor of the second section or the
second grouping of trading and so on.
So what was once the floor becomes the ceiling, if you drop a floor, it's a very similar idea.
Support and resistance tends to be found at round numbers, so for this example, you could say maybe
one to 80.
And that's because large order flow tends to happen at large round numbers because, you know, unlike
us, some of these large houses are coming in buying millions of shares.
So they have to continually buy in this area when it pulls back, because if they buy too many shares
in one shot, it'll make the market move against them.
Those of us that are retail traders, we don't have that issue.
So let's go ahead and take a look at what this looks like in an uptrend.
Well, you can see clearly that somewhere around 140.
Forty dollars.
Apple has been supported in the past.
You can also see that we had seen some trouble here.
Resistance happen now, we did break down below here, but there's also a gap there which is somewhat
supportive.
You can see we broke down below here and then turned around to form a hammer, which is a very bullish
candlestick.
And couldn't even get back down here the next time, so you can see this does tend to repeat itself.
And as I draw these lines, you can see that there truly is an order to the market.
You know, it's not as random as a lot of people think, think that it is now.
Does this always work?
Well, of course not.
There are times where support and resistance fails, but at the end of the day, it gives you a guideline.
So typically what we like to do is we like to say, OK, well, we have our lines, you know, we need
a candlestick or some type of pattern or something to.
Confirmed, so this breakdown in this hammer being formed on this daily candlestick.
At this level confirms for us that there is support coming in.
Another thing that you should pay attention to is on this kind of thing.
There was a lot of volume.
So that shows that there's real strength there.
There's real conviction in buying or in this case, it could have been real conviction and selling.
But guess what?
They're losing money the next day, so they have to short cover.
So there are a lot of different ways to look at this.
But one thing you know, here's a here's a burish engulfing candlestick at 180, you know, the volume
wasn't great, but it was a bearish candlestick.
So this is a much better signal than this one.
But both are certainly valid signals.
Another thing that you want to pay attention to is that we've been in uptrend.
So this may signal more of a pullback as opposed to a shorting opportunity because you always want to
go with the trend over the longer term.
Now, I'm going to go ahead and remove all of the lines.
And talk about Fibonacci, so this case.
I'll go ahead and use General Electric, Fibonacci is a mathematical.
Formula that was discovered by a mathematician many centuries ago named, you guessed it, Fibonacci,
and what he recognized is that there were patterns that repeated themselves throughout nature.
Now, without going into the math, the idea is that you you have a trend up or down and typically they
will pull back before they continue going higher.
I mean, that's not a huge surprise.
There are specific amounts that they pull back that matter.
Now, 50 percent is not technically a Fibonacci number, but it is used on the tool because 50 percent
is a lot of times people will get involved when it's called back halfway.
There are other figures to be aware of, sixty one point eight percent of the move being pulled back
and then the thirty eight.
Point two percent Fibonacci retracement level and you can see.
That on the way up from this low, we pulled back right here to the thirty eight point two percent Fibonacci.
Now the tool is on the pitchfork menu and it is the retracement.
Now, there are other forms of Fibonacci that you can get involved in.
But in this case, we're just looking at the retracement.
So the retracement from there was at the thirty eight.
So, like I said, it works in both directions, so the last swinging high is what you want to draw
this from.
You are the last Plecki.
This has actually had a minor Fibonacci retracement level, the seventy eight point six, this swing
high.
Can be extrapolated down to here.
And then there's the thirty eight point two again, you can see that we fell and then we bounced a bit
and sold off.
So think of it as a guideline.
There are some people out there that will use just Fibonacci.
I don't think that's the best use of it.
I think it is something that you want to perhaps get involved with.
Adding it to some other form of analysis, like your support and resistance lines.
Now, your fibonacci's should be drawn from either a swing higher, swing low.
It gets clipped and dragged and then you just simply look at these areas for support.
Again, though, I would caution against using it as your soul.
Indicator.
Now, that being said, if you combine an area of obvious support and resistance.
On a longer term chart, especially.
You can perhaps set up potential trades later, so if we are to pull back.
In Apple.
Down here, you can see that there is a clear support resistance area right around one hundred and eighty
five dollars.
So as we drift lower, Fibonacci traders and support resistance would both give you an idea as to,
hey, this may be a great place to trade.
You want to be looking for, you know, a hammer, a bullish engulfing candlestick, something like
that, a three candle pattern, something along the lines of that to really kind of add to your thesis,
because with trading the.
Best trades are the ones that are based upon multiple reasons, you know, one thing that you will never
see us do as professional traders is just to simply take a trade based upon one sole reason.
So in this case, the 38 the 185 levels both look to be important, we're in an uptrend.
So certainly you don't want to be a seller, even though, you know, we could drop 20, 25 dollars
in the short term.
Apple's been a winner for a very long time.
So there's a very difficult thing to go against it.
Just as in the chart, it's been losing money for, you know, hemorrhaging money for ages now under
ten dollars.
So you don't necessarily want to buy this based upon technical analysis.
This is a sell only stock.