Let's go over, in simple terms, examples of support and resistance strategies.
The first, and our favorite, is the simple break-out of resistance. Here is an old WYNN alert from 70 that worked very well for a day-trade (we're primarily day-traders but sometimes do hold for a day or two). At the time WYNN broke-out the market was very bullish and we anticipated the break-out by entering a day before (posted in our account real-time on that day)
Not all break-outs have to be near new highs -- here is a simple trend-line break of GS which we also entered the day before (again, posted in our account). Trend-line breaks still fit under the resistance break-out strategy.
The inverse of the break-out of resistance long is the break-down of support short. Here is a bear-flag short of QQQQ at 44.
The second type of long strategy is to buy support, be it on a major moving average, or on a previous break-out zone. HMIN 38 had been a break-out alert on our newsletter. Days later the stock offered another opportunity long, this time on a re-test of previous resistance which now was support. Again, great for a day-trade.
The inverse of support long strategy is the resistance short. RS action on Friday is a good example of this as the stock got smacked down by the 50 SMA.
It looks easy doesn't it? It's not. In order to be constantly successful you have to combine that kind of information with some decent tape reading skills and have a few intraday strategies up your sleeve. Nevertheless, studying the basics of support and resistance is an absolute must for new traders and the first step of becoming a technical trader.
