For this lesson, we have to understand that when you have a train running down, and it starts to hit a certain area over and over again. Especially for a downward trend, it’s like hitting a floor over and over and over again.
This area is now becoming a support area. The name support area usually means that it’s a strong area where the market keeps on revisiting. This is also an area of indecision where the market could either go up completely changed direction or we could have a breakout.
So whenever we have a strong area for support in day trading, it actually could be the same with a resistance. And there is a breakout that could mean a pretty good trade setup because it means that the overall consensus is to continue in the same direction.
So here we have the support area which was hit 1, 2, 3, 4, 5, almost six times.
The way I like to gage a breakout is when I have over an entire point of broken support with strength. Like you see in the image
So here we have a nice long break and this is around the area that I would look for reentry to continue down.
This would be the perfect breakout trade right here. So you’re seeing this support area and then it breaks out but then it starts to hit that same area again.
So this would be a good place to re to enter, to go down.
So the same can happen with a resistance area, a resistance area is when there is a trend going up and the market starts to revisit or hit the same area over and over and over again.
When you are talking about resistance areas or support areas, they don’t have to be super precise within one point.
So now we are definitely in a resistance area. So now we’re waiting to see what is the market telling us. This is a huge and decision area because it’s also on a channel.
So we need to wait until we figure out what’s happening. This is an area where traders should never come close to.
OK. So what happens here? The market hits the support area a few more times and bam! It broke through.
So once I see such a serious breakout, this is where I’m looking to enter this area for another trade.
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