How can we actually identify where the support is?

This is a very basic question and i believe a lot of you will brush it off as too easy however unless you have a very systemic way of identifying where are the high probability trades are you will not be able to make a good progress in your wealth accumulation.

For passive investors(Meaning you do not watch the market everyday), being able to spot where all these levels are for individual stocks are very crucial. This is because you are not looking to buy or sell everyday and you are not looking to flip the stock intra day for profits,rather you wish to get in a good price whereby there is an influx of buyers.

If you have read Technical Analysis book,they usually brush it off by just covering a small part of this and just say that the more times it hit that level,the stronger the support is. However i am going to change the way on how you read the support/resistance and bring your understanding 1 step higher.

It is actually NOT the number of times it hit that determine whether it is a support/resistance but rather how it move off from that level.

So let us look at the chart
Venture


Notice how price reject the level i drawn. It is not luck that cause this rejection. Look at the huge volume and look at the huge solid candle on the day with the arrow.

Now let us recall what constitutes a STRONG support
A STRONG support is a price area where price moves off Swiftly and in High Volume PREVIOUSLY

If you think this is a fluke then let us put this to a test

Write down these levels on a piece of paper and stick it beside your computer you will only enter when it reaches this level. You can do paper trade or whatever you want and let us watch how it plays out over the next few weeks or perhaps months.

Obviously you will realize you will be waiting most of the time using this method however this is just one of the arsenal inside my toolbox. There is always a trade off,if you want more frequent signal,the reliability of it being correct will drop. If you want to make good trades then the signals will be a lot lesser.



Entry target between 1.91 - 1.96.
Stop target a close below 1.88
1st Profit target 2.07



Entry target 7.15
Stop Target a close below 7.05
1st Profit target 7.35



Should the current support level at 8.61 be broken,the next area for good purchases will come in at 8.25-8.38 whereby there is a congestion after high volume before it blast off to the upside however it may probably take quite a while before it should test that level(couple of months later probably)


Relax and Enjoy your stay here,if you do not understand then read and re-read the article again