There are support and resistance everywhere so how do we know which are the ones likely to hold and which are the ones that will likely fail? There are multiple kinds of support and resistance they can range from the zone whereby price is rejected very quickly or fibonacci or it could be pivot points.
I will share with you what are the STRONGEST form of support and resistance
So where are we just now? We are in a fairly strong resistance area. Notice how we are rejected in the zone. Now take a look at what our indicator are telling us? Divergence in the CCI indicates waning momentum.
Now you all may be curious why am i not using MACD or the previous CCI setting i'm using? It is a simple reason,if you add in the MACD you will realize that it is mostly flat indicating a Ranging Market instead of a Trending Market and this is when we will look at Oscillators and use Divergence to determine the strength. Longer period CCI is how i enter a trade when the market is TRENDING however when it is ranging,you should look at whether there are divergence in it.
Will it always be correct trading off divergence in oscillators in a ranging market and inside a resistance zone?
No,there's risk in every trade but it is a high probability. Remember that you must keep a stoploss in place for EVERY TRADE (above the zone high) and let it play out. Volume is light so there might not be as big a pullback as 1 would expect. Have i traded off this signal? Nope, i didn't because as i've mentioned market is light volume and has been floating up hence it will almost always favour the upside however the reason i am sharing all these is to let you all know when you should use certain indicators in different market condition and how to plan your trades.
Just like with gold,if you have pulled a trailing stop,likely you would be have stopped out by gold did a 50 dollar plunge before recovering back 30 in one of the trading days sometime back,Market has resumed to make a new high after that but does it mean that you should change your stop to make it wider next time? NOPE. You place a stop for a reason and that is to protect profit,does it matter that you are not selling at the highest or that you miss part of the ride? It doesn't. SERIOUSLY nobody knows when a move is going to continue or stall and reverse in a big time until it has happened. So be cautious of those so called Analyst that are saying where we are heading. The only thing we can do is limit our risk.
Finally a recap, STRONG SUPPORT and RESISTANCE are zones whereby price moved off it STRONGLY and from what i can identify in STI Chart. They are the areas whereby it is likely to at least stall or put in a reverse for the short term.
Strong Resistance are in the area of 2,770 - 2,840 as well as 3,140 - 3,260
Strong Support comes in at 2,250 - 2,350.
Are there support and resistance in between? Yea there are however these 3 that i have listed are really where it should be VERY STRONG and change in the price direction are to occur around these 3 areas.
The truth is the market is dynamic and what is true today can be false a few days later but you need to be able to identify it if you don't you'll get stuck for some time.
