Hi everyone and welcome back to this wealthy education video on how to use support and resistance support
is a price which a stock trades down to and then generally moves up in price.
If you look at our graph on the left the stock has moved down to the support level and is now trading
or bouncing up off of support.
The stock then trades up to what is called a resistance level and that is a price which a stock trades
up to and then generally moves down in price.
And then the stock trades back down to the support level where it will generally move up in price from
that level.
And I say generally because a stock will go through both support and resistance and this can happen
on a fairly regular basis.
But we can use support and resistance to provide sell and buy signals and our stock.
They provide areas where there is a higher percentage chance that the stock will move either up or down
depending on whether it is that support or resistance a break of support or resistance may signal a
strong move.
And the continued direction of the break for the stock.
So a break through support may indicate that the stock is going to move down at a break above resistance
may indicate that the stock is going to move up.
The longer a support or resistance level is in place the more important the signals that the support
or resistance level provides say multiday support level is more important than a multi-hour level and
a multi-week level of support or resistance is more important than a daily level of support and resistance.
You can have both major and minor levels of support.
The Major would be at the higher timeframe and in place for a longer period of time.
And then you can have minor levels of support and resistance in shorter timeframes or these can be set
up within major levels of support and resistance.
So let's look at support and resistance on the chart.
We're going to start with a chart and tell and here I've entered INTC on the upper left portion of the
chart.
It's a daily chart we're using candlesticks and I'm going to draw a support and resistance level at
the beginning of this chart here.
We have a resistance level
here.
We have our support level as we can see the stock traded in this range between resistance and support
for more than a year.
This is September of 2016.
All the way up through September of 2017.
This is an example of how important it is when a long term support or resistance level is broken.
So when the stock broke through this resistance level right around $38 you can see the stock then made
a huge move to the upside.
Eventually reaching right around $57.
So the stock had been trading in this range or consolidating for over a year.
And when the stock broke through resistance it made a large move.
One of the reasons stocks make large moves when breaking support or resistance is because the stock
is doing something that most investors do not expect at a resistance level.
You expect the stock to turn back down and move lower and a support level.
You expect the stock to bounce or move up.
All of that support level what a stock breaks through a resistance level investors that have sold the
stock at this level thinking that the stock is going to go down now must re-enter the stock causing
it to move up and the same thing with a break of a support level.
Now let's take a look a little closer in time.
So we're going to use multiple time frame analysis to look at how we might want to trade Intel today
if we were going to enter the stock.
So we have those support and resistance levels in the past.
And now the stock is trading higher.
So we have a support level just about 42 that we'll draw on and then we're going to zoom in to an hourly
chart.
And here we can see that there are support and resistance levels on the hourly chart as well.
Right around forty nine is our resistance level and our support level remains here just above 42.
This is our major support level.
If we zoom out we'll see that this is a minor resistance level.
I will go back to a daily chart where we see the minor resistance level as the stock is bouncing up
and a downtrend.
Our major resistance level at this point would be the high that the stock reached just below 58.
So there we have an example of a major and minor resistance level early in the chart.
We saw a break of the resistance level and the stock move up strongly to this 58 level.
We now have a major support level in place just above 42 which stock has touched several times.
And early 2018 and in October 2018 and we have a minor resistance level right around 49 where the stock
has bounced up 2 after touching support just about 42.
So that's an example of support air resistance and the stock up until and this video we talked about
resistance and support levels that we could draw horizontally and those work well when a stock is not
moving in an uptrend or downtrend.
But in a consolidation range and our next video will talk about an exponential moving average which
is a way to draw a support resistance level when a stock is trending either up or down.
I look forward to seeing you in the next video.