« Kiwi Update! | Home | US Retail Sales Improve! »
Support and Resistance!
By Mike Conlon | December 10, 2009
You have probably heard the phrase “support and resistance” thrown around with regard to technical analysis and price charts. This is one of the most basic and fundamental concepts in analyzing charts. Support is the area on the chart where there is buying interest, and resistance is the area where there is selling interest.
Why do I mention this now? Yesterday’s trade on the New Zealand Kiwi (NZD/USD) is a perfect example of how support and resistance works. Let’s take a look at what happened yesterday and why support and resistance is such an important concept.
(Click charts to enlarge)
Looking at the above three charts, you can see how resistance was identified at .7185. In the first chart, once the price of the pair traded up to resistance, it paused and consolidated a bit as all of the sellers were absorbed at that level.
In the second chart, once the pair broke through resistance, it settled back down and now used what was formerly resistance as support. This means that there is now buying interest at that level.
In the third chart, you can see the pair extend for roughly another 100 pips.
What these chart illustrate is a classic case of when resistance becomes support. Savvy traders who can identify where these levels are can take advantage of low risk entry points for profitable trades. And the same thing also works on the other side, when support can become resistance.
Knowing how to identify these areas can be the difference between making and losing money. The professionals know how to find these areas, shouldn’t you?
To become more educated about technical analysis, be sure to enroll in our currency trading courses!
Want to test out you chart reading skills on a free, real-time practice account? Get started here!
Tags: account, blog, charts, course, currenc, currency, currency trading, dow, forex, forextrading, fundamental, fx, fxedu, Il, interest, market, Mike Conlon, money, nzd, pair, pips, practice, rate, ssi, technical, time, trade, trader, trades, USD
Topics: What To Look At In The Market | No Comments »