Support and Resistance Areas | Breakout
Remember that the text below is a transcription of the video, it is only meant to be a support for it. So you will need to watch it before you read it.
This is a quick day trading lesson on breakout trading.
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 kind of like hitting a floor over and over and over again. This area is now becoming a support area. Support areas usually mean 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, change direction, or we could have a breakout.
So whenever we have a strong area for support, it actually could be the same with a resistance area and there is a breakout that could actually 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 one, two, three, four, five, almost six times. Right. The way I personally like to gauge a breakout is when I have over an entire point of broken support with strength. So here we have a nice long break. And this is around the area that I would look for reentry to continue down.
What happens after I continue? I have to really watch the market. But right now we’re just focusing on the breakout trade and this would be the perfect breakout trade to go down.
So the same exact 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. In this case, we have a really nice resistance area forming. There was one hit, then it revisited it.
When you are talking about resistance areas or support areas, they don’t have to be super precise within one point to more or less.
This, again, is an indecision area. So now we’re waiting to see what is the market telling us. This is actually a huge indecision area because it’s also in a channel. , right? It’s a consolidation area here. What’s happening? We want to know. This is an area where traders should never come near. OK, so what happens here?
We hit it again. We hit it again. So we keep waiting and bam, it definitely broke through. So once I see such a serious breakout, this is where I’m looking to enter this area for another trade because chances are it broke. It wants to continue.
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