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How to Analyze Stock Support and Resistance?

How to Analyze Stock Support and Resistance?
September 23, 2021 Martha Stokes CMT

How to Analyze Stock Support and Resistance?

Comparing Price Action with Leading Indicators

During a downtrend, traders need to be able to determine if a big white candlestick is a true Reversal back to an uptrending pattern or if it is just momentary Rebound price action caused by Buy the Dip Investors and Buy to Cover Traders. Below is a stock chart example that requires more than just a candlestick or an indicator crossover to analyze properly.

Buy the Dip Investors can and do move price often in big one-day gains which then reverse and whipsaw the following trading day. Buy to Cover price action moves for Sell Short Traders are usually smaller and more controlled Exit Candlestick Patterns that clearly do not reverse the downtrend back to an uptrend.

Learning to properly interpret Charts, Price, and stock Volume is a skill that all Retail and Technical Traders need to spend time developing. If a trader only relies upon indicator crossovers, a handful of Candlestick Patterns, or a combination of both, they will encounter continual whipsaws and losing trades.

Sure, there will be that occasional stock that moves up for a nice gain. It makes the trader feel happy and confident until the next loss occurs. It is easy to make stock trading profits, but it is harder to keep them.

Developing Spatial Pattern Recognition Skills™ is crucial to consistently successful trading and a high Return on Investment (ROI) by the end of the year.

Making an income from trading demands more than a meager 2% gain on a trade. Keep in mind that many trading costs far exceed a 2% gain. Oftentimes, traders are losing money with such low returns and don’t even realize it until the end of the year.

How to Analyze Stock Support and Resistance requires studying the following:

Volume Indicator Webinar

Learn why volume is as important as price analysis, and why volume leads price. Learn MORE

Balance of Power Webinar

Learn leading indicator patterns for Dark Pool Buy Zones, bottom formations, and to get ahead of huge gaps or run up. Click HERE

Time Segmented Volume

Webinar to learn leading indicator for early entries and exits, how to track Dark Pools that trigger High Frequency Trader explosive runs and huge gaps. Learn MORE

  1. Does stock Volume lead price, or does it lag price?
  2. Are the giant Buy Side Institutions which use Dark Pools quietly accumulating the stock?
  3. Is the candlestick a normal size, or is it extraordinarily long? What does the Candlestick Pattern represent?
  4. What type of Resistance is above the current price? For example, is it weak, moderate, strong, or very strong Resistance?
  5. How many Point Gains are still possible prior to the Resistance Level?
  6. Is the Risk vs. Point Gain Potential reasonable?
  7. Why did the stock stop moving up, and what type of Topping Action formed?
  8. Which Stock Market Participant Group moved price on the last long white candlestick?
  9. If you were to trade this stock, what Trading Style would you use?
  10. Where would a Stop Loss be placed?

You should study the stock chart on both Weekly and Monthly Chart Views.

Go to the TC2000 Learning Center to watch training webinars on Time Segmented Volume TSV, Balance of Power BOP, Trade Management Planner, and Pro Style TC2000 Scans.

TC2000 Tools – TechniTrader custom scans and chart layouts. How to interpret, read, and use TC2000 Indicators. Trading tools and support.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.

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