Technical Analysis

Support
And
Resistance
 Support and Resistance

What is ‘support and resistance’?

• When price rises and corrects, the peak formed is a resistance

• When price declines and throws back, the trough formed is a support
• Many trading strategies are based on support and resistance
• Support and resistance form because of the psychology of the traders/investors
• Demand is higher at the support zones
• Supply is higher at the resistance zones
• S&R are useful to set take positions
SUPPORT AND RESISTANCE
SUPPORT AND RESISTANCE
S&R as Seen in CHCL

S
 HH, HL, LH, and LL

HH= Higher high

Uptrend= Higher highs and higher lows formations
HL= Higher low Downtrend= Lower highs and lower lows
LH= Lower high
LL= Lower low
HH, HL, LH, and LL illustrated
 Why Support and Resistance are Important

• Price tend to stop/pause/stall or even reverse around previous S&R levels

• Could be potential buy/sell region
• It is the indication of shift in demand and supply pressure
• The more time S&R are tested and unable to break, the more reliable it
becomes
Plotting S&R in ALICL
 Importance of Round Figures

• Human beings tend to think in terms of round figures

• Round figures tend to work as a psychological barrier
• Many traders/investors wish to entry/exit at these levels
Psychological levels in NIB
Fibonacci
Sequence
 Fibonacci Sequence

• Developed by Leonardo Bonacci, Italian mathematician

nickname: Fibonacci
• Considered to be the most talented western mathematician of
the middle ages
• The sequence is 0,1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377,
610…..etc.
• “1.618” is a golden ratio
• Plato considered the golden ratio to be the “most binding of all
mathematical relations, and considered it the key to the physics
of the cosmos”
 Fibonacci Retracement
• Fibo retracements are used to forecast the end of correction
• In uptrend: Fibo is drawn from a swing low to swing high
• In downtrend: Fibo is drawn from a swing high to swing low
• Important retracement levels are: 23.6%, 38.2%, 50.0%, 61.8%,
• Percentage derived by dividing 34/144, 55/144, 89/144
Fibonacci Applied in SCB
Fibonacci Applied in CHCL
A

B
 Fibonacci extension

• Extensions are used to determine potential reversal zone when there are no
any previous highs/lows
• Extensions are used to determine target levels/
 Fibonacci extension
• Extensions can also be drawn to know to what extent market will fall
Thank you!