In an effort to expand on the concept of support and resistance, in reference to an earlier article, let’s take a look at the EUR/USD.

Here’s the daily chart that I’m currently following. In it you see the yellow line at the bottom, marking off a key support level that I expected prices to test.

The closest it got was right at the end of May, before prices moved back up.

Prices can still come back to test this level, at which point we’ll see how this support level holds up.

Now how did I come to this support level?

It’ll be clear by taking a look from a further perspective…

If you trace along the yellow line, you can see, at the beginning of December that level acted as a very strong resistance point, halting the upswing started in mid-October.

That resistance price level was then tested again in mid-March, and created a degree of consolidation before breaking through to the highs seen in early May.

Quite simply by looking for areas where price was supported or resisted in the past I use that as my guide.

The longer that a support/resistance level has held, the more weight I give to it.

After defining them, I then watch how the price acts around them. This is where you pick up clues on what the market wants to do.

To finish, you’ll also note that the high formed in early May now becomes a key resistance point, which may form the upper level to a trading range, and if broken will potentially allow price to move up unrestricted until it meets its next resistance point.

I hope this helps to explain a bit more how I look for key support and resistance levels.

Continued Success!

Ray

Categories: Trading

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