No. of Recommendations: 9
How much weight do you put on horizontal support/resistance levels when the trendline or a (diagonal) channel is long and strong?
Jeff


Wow Jeff,

'How long is a piece of string?'

Trend has to have priority, after all, to have a true reversal , then the trend has to be broken - whatever time frame you are looking at.

If you are seeing 'reversals' away from the trendline then they are more likely to be consolidation/retracement periods.

For me, trend gives me direction (who would really have expected Nas to have continued the down trend for so long when it first started?) and some opportunity. However, support and resistance provide me with trading targets, as they are generally part of some form of chart pattern and therefore can give some detailed idea of specific levels to aim for.

Again, for me, a break of trend is a signal to close existing positions, rather than the signal to open new ones, those signals come on the break of the nearby support, as well as the trend (bull mkt) or break of nearby resistance as well as trend (bear mkt). Otherwise you may find that you end up in either a range (urgh!) or getting squeezed as the price reverses back into it's original trend, and you have good reason to 'widen' the overall trendline.

I have found it very rare that you get a pure spike reversal in the mkts, there is always a period of 'neutrality' in the transition from one direction to the other.

TBS

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