WEBVTT 00:03.270 --> 00:08.830 In this video we're taking a look at using support resistance with candlesticks. 00:08.830 --> 00:14.020 And as you can see I have the Wal-Mart chart opened again and I'm going to show you a couple different 00:14.020 --> 00:17.030 examples here of support and resistance. 00:17.020 --> 00:18.700 Obviously there is support here. 00:18.700 --> 00:21.940 The market just simply wouldn't break down below this area. 00:23.150 --> 00:23.870 So 00:26.300 --> 00:30.980 obviously you want to be a buyer in this general vicinity until shown otherwise. 00:30.980 --> 00:33.800 Now how do you use candlesticks in conjunction with this. 00:33.800 --> 00:41.120 Well there's a lot of different ways you can simply just play this important resistance and not wait 00:41.120 --> 00:42.890 for the candlestick. 00:43.220 --> 00:53.580 But another thing that you can do instead is perhaps look for signs that the market is trying to turn 00:53.580 --> 00:53.960 around. 00:53.970 --> 00:59.580 So we're falling into support and you can see that we bounced rather hard the sellers couldn't keep 00:59.580 --> 01:04.470 up the downward pressure and that was your first sign that you would bounce. 01:04.470 --> 01:07.360 This is actually candlestick called a hammer. 01:08.280 --> 01:10.170 You can see this very neutral candlestick. 01:10.170 --> 01:16.350 They tried to break it down and at the same spot found that they couldn't we broke above that range 01:16.350 --> 01:24.180 and everybody in that candlestick is now losing money and they have to buy their position back in order 01:24.180 --> 01:27.590 to cover their shorts. 01:27.600 --> 01:35.550 So a lot of it will come down to simply paying attention to where price can or cannot go and looking 01:35.550 --> 01:41.520 for failure to break through that level or long weeks or something like that. 01:41.520 --> 01:45.680 Now here's a trend line that you can make out on this chart. 01:45.730 --> 01:50.350 And clearly that's a very negative turn of events on a heavy volume. 01:50.350 --> 01:58.160 So what does that tell you that tells you that support has been sliced through pretty straight forward 01:58.180 --> 01:58.960 there. 01:58.960 --> 02:04.720 However along the way here was another one of those hammers that I just talked about where we broke 02:04.720 --> 02:07.390 through but couldn't stay below there. 02:07.990 --> 02:09.790 And that of course is a good sign. 02:09.790 --> 02:12.340 Look at these long weeks right there on this line. 02:12.340 --> 02:14.350 That's a good sign as well. 02:14.350 --> 02:21.050 You want to see one of two things really when you're talking about a support a resistance level you 02:21.050 --> 02:28.770 either want to see a candlestick that just goes right through it and closes on the other side of it. 02:29.030 --> 02:36.470 Higher timeframes of course are more important or you want to see a situation where the candlestick 02:36.530 --> 02:38.630 tried to break through it but failed. 02:38.690 --> 02:44.560 Those are your two tells anything in between like a candlestick closing right and support or resistance 02:44.570 --> 02:49.670 typically is a less reliable signal because you're still talking about a 50 50 proposition. 02:49.670 --> 02:54.350 Yes typically support and resistance holds but it doesn't always. 02:54.410 --> 03:02.440 So with that in mind let's take a look at some charts here a couple random charts. 03:05.490 --> 03:07.240 Take a look at G here. 03:07.410 --> 03:13.860 Let's see if we can find an example of the support and resistance. 03:13.860 --> 03:20.430 Well here's one that we had some support here and we tried to we cap lower and then tried to break above. 03:20.430 --> 03:25.620 There you can see that the weak broke above the support line just briefly and then turn around it fell 03:25.620 --> 03:28.280 back down well is it a surprise that we fell from there. 03:28.320 --> 03:34.890 Well of course not because we couldn't break through there to begin with. 03:34.920 --> 03:40.710 So a continuation of that weakness would be the default expectation 03:43.360 --> 03:54.090 take a look at Hyatt and here is a scenario where we had some resistance here and there's a couple different 03:54.090 --> 03:55.270 tells here. 03:55.410 --> 04:01.470 This candlestick here shows that they tried to rally and break through it but they failed and they broke 04:01.470 --> 04:01.910 down through it. 04:01.910 --> 04:07.270 It's actually a candlestick called a Hanging Man which you'll learn about later there's another one 04:07.270 --> 04:07.670 here. 04:07.690 --> 04:12.820 And beyond that there's an extraordinarily bearish candlestick that close at the bottom of the session 04:13.330 --> 04:17.130 showing just how difficult it is to get above this area. 04:17.440 --> 04:18.990 And we have since broken down. 04:19.030 --> 04:24.640 So again this is a matter of you know you have to pay attention to the psychology does it work. 04:24.640 --> 04:26.770 One hundred or so the time of course not. 04:26.770 --> 04:35.640 But it does give you a leg up a leg up on the other traders out there who are simply looking at their 04:35.660 --> 04:41.380 you know you have to keep in mind that there are a lot of traders out there looking at charts like this 04:41.980 --> 04:46.720 and their brokerage platforms they don't really understand the nuances of price. 04:46.730 --> 04:48.760 You know they just see that it fell a couple times. 04:48.760 --> 04:51.190 They didn't get the warning you know to them. 04:51.190 --> 04:53.930 This chart looks like it could be rebounding. 04:54.010 --> 05:00.520 So that's part of what makes candlestick trading so important and so useful when it comes to support 05:00.520 --> 05:04.560 resistance it's something that those of us who've been training for a while take for granted. 05:04.570 --> 05:10.300 But every once in a while if you look at the line charts of the area charts you really see the major 05:11.170 --> 05:20.920 problems that a lot of the public faces quite frankly there is an area there though showed resistance 05:20.950 --> 05:25.690 it looks like a zone it's not necessarily just one line but you can see that we couldn't break above 05:25.690 --> 05:30.550 there and then we formed the very negative candle and then broke down and then we formed what is known 05:30.550 --> 05:34.810 as a shooting star the next time we tested it and it's not a huge surprise they couldn't break above 05:34.810 --> 05:39.820 there and then they fell you know support and resistance is going to be the basis of everything you 05:39.820 --> 05:40.770 trade. 05:40.900 --> 05:50.500 So you need to notice where price won't get above or below and then start placing your trades based 05:50.500 --> 05:51.550 upon that. 05:51.740 --> 05:54.440 You know there's a simple way to look at it. 05:54.470 --> 06:01.080 You know we have an area here for example that we support and it works several times but eventually 06:01.080 --> 06:08.640 it gives way and then you realize that below here you want to be short of this stock. 06:08.670 --> 06:12.870 This is an area where there was a lot of buying interest and it's been absorbed all those orders have 06:12.870 --> 06:14.790 been filled and overwhelmed. 06:15.240 --> 06:22.380 So pay attention to this you're looking for several hits at the same line price or same area. 06:22.540 --> 06:25.760 This was hit six seven eight nine times. 06:25.820 --> 06:27.580 We'll be more than that before. 06:27.580 --> 06:30.520 So that tells you just how important this support was. 06:30.520 --> 06:36.820 And once seventy five dollars gave way we fell pretty significantly and you'll do see this time and 06:36.820 --> 06:39.370 time again quite often. 06:39.370 --> 06:42.930 Markets are just going from point A to Point B. 06:43.060 --> 06:46.270 So you know here we had support. 06:46.270 --> 06:49.700 Now it looks like we may come back down and to try to find it. 06:49.710 --> 06:50.860 There is resistance there. 06:50.890 --> 06:55.070 We'll probably go back up there to try to find that eventually. 06:55.810 --> 07:03.040 It's just again and again and again it's there there's really no big secret to it. 07:03.040 --> 07:06.150 It's just where buyers and sellers are. 07:06.160 --> 07:09.680 So JP Morgan you know we've had some support here. 07:09.700 --> 07:12.190 I suspect there'll be some sellers right up here 07:14.910 --> 07:17.730 there's resistance here but there was also support there. 07:17.770 --> 07:24.270 There's people who once that broke and it came back they're willing to get out of their positions or 07:24.270 --> 07:27.140 break even to kind of save their accounts a bit. 07:27.230 --> 07:31.710 You know they've been spooked bank out of the market so support resistance is crucial make sure you 07:31.710 --> 07:34.060 use it in all of your analysis. 07:34.080 --> 07:37.330 Pay attention to where the market will or will not go. 07:37.410 --> 07:42.920 You know once you break through it that's a sign as well it's a sign that you know one side get overwhelmed 07:42.930 --> 07:45.360 in this case the buyers got overwhelmed.