Reasons for chart patterns

bonkerrs · 9 September 2014

Been trying to get better familiar with chart patterns.

At the top left/middle of the chart. Would I be correct in saying that a resistance level has been breached and then turned into a support level?

If this is the case. Why does this happen? I mean, what is the reasoning behind a resistance level then it becoming a support level once breached.

edit: far right of the chart. Does this look like a possible breakout pattern?

burglar · 10 September 2014

From Investopedia:

http://www.investopedia.com/articles/trading/06/supportresistancereversal.asp

I found this one to be interesting:

http://www.investopedia.com/articles/technical/02/061802.asp

tech/a · 10 September 2014

bonkerrs said:
Been trying to get better familiar with chart patterns.

At the top left/middle of the chart. Would I be correct in saying that a resistance level has been breached and then turned into a support level?

Other way around.
Support becomes resistance

If this is the case. Why does this happen? I mean, what is the reasoning behind a resistance level then it becoming a support level once breached.

Support is at a price considered where value ONCE was. Once breached then either a large seller or group of sellers
decide that they wish to mitigate their risk. That seller or group of sellers may not get all of their holdings off at that level or near to it and leave sell orders at that level to be filled if it ever reaches it again. That's when selling is seen again and resistance at that level is seen again.

edit: far right of the chart. Does this look like a possible breakout pattern?

It could be and you could take a trade in ANTICIPATION of a positive move
OR
You could wait for supporting evidence that the move is going to indeed "Breakout"
View attachment 59350

Chart patterns are a diagrammatic presentation of crowd behaviour.

(1) If I'm in a crowd and scream FIRE!! they will all race for the exit.

(2) If I tell them Donald Trump is handing out $500 notes to everyone who goes to the 5th floor if they are quick
then they will all run up the stairs.

(3) If I'm in a crowd at a concert some will want to get closer to the action---some closer to the bar but most will be happy where they are.

(4) If Katey Perry starts taking her kit off then there is a rush to the stage.

(5) If Meatloaf comes out and does the same there would be a lack of interest and a rush away from the stage---particularly if Kate left!

(6) If a guy next to me starts shooting then those in the know will either take control of him or flee.
It will take sometime for people to feel safe and return.

(7) If Donald trump appears next to me and starts handing out cash then those around me in the know will take the cash until everyone knows he is there and he runs out or draws a huge crowd.---some will come back for many helpings.

And on it goes.

bonkerrs · 10 September 2014

tech/a said:
(5) If Meatloaf comes out and does the same there would be a lack of interest and a rush away from the stage---particularly if Kate left!

LOL though some people may roll (pun intended) that way

Thanks for the link to investopedia. Brilliant reference site.

Here is another one that may be recognised as a pattern -inversed head and shoulder? If correct should lead to a reversal and trend upwards.

burglar · 11 September 2014

bonkerrs said:
... Here is another one that may be recognised as a pattern -inversed head and shoulder? If correct should lead to a reversal and trend upwards.

I've been looking at this since you posted.

Should I comment? I am new at this sort of thing.

My totally unqualified opinion
There seems to be a huge channel in deep downtrend.
Three significant touches on top and three significant touches along the bottom.

I don't know if that trumps the short-timeframe, recent action.

Craton · 11 September 2014

Having a stab at this. Hmm, back over the longer term I ask, would the Smart Money take so long to unwind their positions?

Looking back over last six months or so, resistance does seem to have become support. Volume:- accumulation taking place perhaps?

NCM linked to the underlining commodity too.

Craton · 11 September 2014

Sorry, posted wrong chart in my previous post.

tech/a · 11 September 2014

Ahh I see much different????

Craton · 11 September 2014

Cheers tech/a.

Am having trouble with the interwebz and stoopid windows updates...could be the noob at the end of the KB too...

tech/a · 11 September 2014

Craton said:
Cheers tech/a.

Am having trouble with the interwebz and stoopid windows updates...could be the noob at the end of the KB too...

Yahoo Finance free charts.EOD.
Or Stockness monster.

AussieMatt · 13 September 2014

bonkerrs said:
Been trying to get better familiar with chart patterns.

At the top left/middle of the chart. Would I be correct in saying that a resistance level has been breached and then turned into a support level?

If this is the case. Why does this happen? I mean, what is the reasoning behind a resistance level then it becoming a support level once breached.

edit: far right of the chart. Does this look like a possible breakout pattern?

View attachment 59350

I tend to look at it as areas that attract order flow. It makes sense that key levels in any market are a logical place for participants to rest their orders.

Reasons for chart patterns

bonkerrs

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