Market Days &

Support and
Resistance
 Initial Balance
To understand the types of Market Days, we must familiarize
ourselves with the concept of initial balance. It represents the
price data, which are formed during the first hour of a trading
session. During the first hours (9:15 to 10:15), stock exchange
specialists establish the Initial Balance High (IBH) and Initial
Balance Low (IBL) as crucial references to ensure smooth trading
of instruments.
Types of Market Days
 1. Trend Day
On a Trend Day, a good offense is the best defense. Trend Days are when
you can expect a resilient price conviction. Participants are confident
they can move the market in their direction and as a result, market
values are on the move. They exhibit a movement further away from
their established value and a sustained price movement with increased
trading volume. Although less frequent, say a few times a month, trend
days pose an opportunity for traders to make significant profits. They
are, of course, subject to risk. The madness of trend days are generally
followed by quietness and reduced volatility in the market.
 2. Expanded Typical Day

Much like a Typical Day, an Expanded Typical Day starts with a

sharp movement in the market. But here, the initial balance is
not as wide as that of a Typical Day, meaning the movement
isn’t as sharp. As a result, it loses the safety net of a
range-bound session and is subject to sharp rally or correction
later in the day.
 3. Double Distribution Trend Day
A Double-Distribution Trend Day is a Trend Day minus the trader
conviction. Ironically, here, an occurring trend is the product of the
indecisiveness of traders. During a Double-Distribution Trend Day,
traders start quiet and slow. As a result, Initial Balance is narrow,
indicating a possible breakout. This is the first phase. Following
this, the price will eventually break out of that range and move
towards a new range of prices, which is the market's attempt to
confirm whether this new price range is valid or not. This is the
second phase. If the participants, a.k.a the buyers and sellers
accept this price point, it is the new reference point for traders.
 4. Typical Day
A Typical Day comes when there is a wide initial balance—either the
bulls rage or the bears attack, triggered by an economic or
business event. A price action far from the underlying asset’s
established value attract both long and short sellers to participate
in the market. Following this, the market moves swiftly within the
extreme ranges set in that day.
 5. Trading Range Day
If you’ve experienced buyers and sellers in a tug of war, you’ve
experienced a Trading Range Day in action. This is established
during the Initial Balance, which is about as wide as that of a
Typical Day, expect the participants are actively battling
throughout the trading session.
 6. Sideways Day

Now, there is a distinct difference between a Trading Range Day

and a Sideways Day. On the latter, the participant dust their hands
and simply refrain from trading. The price is range-bound, the
initial balance is narrow and the market is essentially silent. A
Sideways Day usually occurs after a major economic or financial
event or prior to a market holiday.
Support &
Resistance
 Introduction

Investors and traders have banked on support and

resistance long before they could point them on a
rectangular screen. Until the wave of technology hit the
markets, floor traders mathematically calculated these
levels using highs, lows and closes of assets in the prior
periods. The strength and precision of these indicators led to
their entry into the online trading platform.
 What are Support and Resistance?
‘Support’ and ‘resistance’ are arguably two of the most commonly
used terms in the domain of the stock market. They lay the very
foundation of technical analysis, to say the least. From novice
traders to seasoned ones, everyone uses it as a key determinant of
potential trades. Various technical indicators such as the Fibonacci
retracement, Wolfe waves, Pivot points, etc. are built to help you
identify potential support and resistance levels.
 Support

These are the price levels at which the

stock price in a downward trend
experiences a surplus of buyers over
sellers. To put it in simpler words,
support is a price point at which the
demand exceeds the supply. This
increased participation by buyers
tends to prevent the price from falling
any further.
 Resistance
This is the exact opposite of the support levels. These are the price
points where the supply exceeds the demand. The responsive traders
wait for the price to come to a perceived level of overvaluation and
participate to push prices back to a level of fair valuation.
 The Principle of Polarity
Have you ever noticed a support level serving as a resistance level once it's
breached or a resistance behaving like support? This is what the Principle of
Polarity states. This happens due to, again, demand and supply. These price
action points leave an impression on the trader's mind and traders remember
these points in hindsight the next time they trade.
 How Gaps Act as Support and Resistance?

Gaps are one of the key indicators of support and resistance. When there is a
gap in the market, buyers and sellers tend to ‘fill the gap’. Once gaps are
filled, the price action either reverses or the trend continues. A price rally can
cause a gap-up on the charts. As traders try to fill the gap, the lower end can
act as the support level. The price can either break this level and fall further
from the gap or move upwards. Conversely, if there is a gap-down, the upper
end of the gap can act as the resistance level.
Psychological levels 🤝 Support and Resistance

Psychological levels are ‘easy to remember’—they are mainly

round numbers like 1000, 2000, 10000, etc. Psychological levels
are represented by invisible lines at high volumes as traders try
to push the stock or indices on either side. These levels act as
Resistance or Support as the price of asset might pause or
reverse from this level.
Bank Nifty reversing from 44500 level (Psychological Level)
 Wicks as Support & Resistance

Candlestick wicks are a sign prices are being rejected by

the buyers/sellers. It signifies the unsuccessful attempts
to move a price towards a certain direction. Traders look
out for wicks to seek insight into potential trend reversals
and to set support and resistance levels since wicks
represent price rejections.
Wicks as Support
Wicks as Resistance
Examples of Candlestick
Patterns at Support &
Resistance