*One of the key concepts of support and resistance is that after a support or resistance level is

broken, it shifts direction. In other words, after a support level is broken in a move to the downside,
it becomes resistance in subsequent price attempts to rally. After a resistance level is broken to the
upside, it may later act as support for further price gains.

*The best way to get a handle on the relative strength of a support or resistance level is to view it in
the context of time and price significance.

✓ The longer the time frame of the price point, the greater its significance. A weekly high/low is
more important than a daily high/low, which is more important than an hourly high/low, and so on,
down the time scale

. ✓ Trend-line strength is also a function of time frame and durability. A trend line based on daily
charts tends to be stronger than a trend line based on hourly prices. A trend line that dates back six
months has greater significance than one that’s only a week or two old. Also, the more often a trend
line is tested (meaning, prices touch the trend line but do not break through it, or break through it
only very briefly and by small amounts), the more valid it is.

✓ The strength of support or resistance levels during a retracement depends on the strength of the
support or resistance during the prior directional move. A retracement refers to a price movement in
the opposite direction of a previous price advance or decline. The distance that prices reverse, or
retrace, is called a retracement. For example, trend lines that were support in a downmove will act
as resistance in any retracement higher. The strength of the trend-line support on the way down,
such as how many attempts were needed to break below it, will give a good indication of its likely
strength as resistance in the retracement

*Different trading styles focus on different types of support and resistance:

✓ Tests and breaks of short-term support or resistance levels are the meat and potatoes of intraday
trading. Short-term traders focus on the nearest support or resistance levels (for example, 5- or 15-
minute or hourly highs/ lows and trend lines) as guides to the immediate direction of prices.

✓ Tests and breaks of longer-term support and resistance levels are the fuel that fires longer-term
trends or defines medium-term ranges. Medium- to longer-term traders typically focus on longer-
term support or resistance levels, such as daily/weekly highs/lows, and trend lines drawn off them,
to guide their trading.

*Candlestick charts are best analyzed using daily or weekly periods rather than intraday periods like
1 hour or 30 minutes. The philosophy behind candlestick analysis is that a full day or week of trading
is needed before the market has rendered a verdict, potentially offering signals about future
direction.

*The key to trading on chart formations is to recognize the time period in which they’re apparent
and to factor that into your trade strategy. A reversal pattern that occurs on an hourly chart, for
example, may constitute a reversal that lasts for only a few hours or a day and retrace a relatively
smaller pip distance. A reversal pattern on a daily chart, in contrast, could signal a significant
multiweek reversal spanning several hundred pips. Keep the formations you observe in the proper
time-frame perspective

*Major Technical Principle As a general rule, the longer the time span of a trend, the easier it is to
identify. The shorter the time span, the more random it is likely to be

*As a general rule, the violation of trendlines with a sharp angle of ascent or descent is more likely to
result in a consolidation than a reversal.

*The size or length of a trend is an important factor, as with price patterns. If a series of ascending
bottoms occurs over a 3- to 4-week span, the resulting trendline is only of minor importance. If the
trend extends over a period of 1 to 3 years, however, its violation marks a significant juncture point.
Just remember: Big trends result in big signals, small trends in small signals.

*Also, if a line gains significance from the fact that it has been touched or approached, the extended
line will become equally as important, but from a reverse point of view, since extended lines reverse
their support/ resistance functions.

*the violation of particularly steep trend is not as significant as that of a more gradual one.
Penetration of a steep line usually results in a short corrective movement, following which, the trend
resumes, but at a greatly reduced and more sustainable pace. Usually, the penetration of a steep
trendline represents a continuation rather than a reversal break.

Major Technical Principle The significance of a trendline is a function of its length, the number of
times it has been touched, and the angle of ascent or descent.