[Must-know! ] Awareness of resistance and support? ~ Horizontal line Part ② ~ [Line Analysis Basics Course #2]
Hello! I am SAKU!
This time,previous article continues with an explanation about horizontal lines!
Before getting into the explanation of the line drawn at the breakout of the Support/Resistance (R/S) turn, I would like to explain about the resistance line and support line first!
This is an essential concept not only in line analysis but in learning technical analysis, so let's understand it well!
Support Line and Resistance Line
・Support Line (Support)
Support Linemeans a line that supports the downside movement (the valley portion).
To be supported by a line means buy orders such as new buying, profit-taking on long positions, or even buy orders to cover short positions around that linehave been placed near that line.
・Resistance Line (Resistance)
Resistance Linemeans a line that suppresses the upside movement (the peak portion).
To be resisted by a line means that orders such as new selling, profit-taking on long positions, or even selling to cover short positions around that linehave been placed near that line.
Note here that the terms support and resistance are not limited to horizontal lines; they are also used for lines in general such as trendlines (to be learned later), referring to their roles or acts of support and resistance, or the awareness of them.
I know this is hard to grasp in words, so please look at the diagram below.
“Awareness of Resistance and Support”
Buying and selling awareness when considering Support/Resistance
Next, about support and resistance, let's examine how the line relates to changes in buying and selling awareness! Please look at the diagram below.
・Example of buying/selling awareness when considering Support/Resistance (in an uptrend)
“Buying/Selling Awareness when considering Support/Resistance”
As shown in the figure, outside the supported line, since the line is not broken, there is accumulation of buy orders to support the price (the opposite for resistance).
And when that line is broken through, it is likely to accelerate in the direction of breaking, dragging in stop orders (sell orders) and take-profit or new orders (sell orders), i.e., a breakout.
It’s not just “the line was broken!”; we should also consider what it means to have broken that line.
The Reg-Support (Res-Support) Reversal
As a line acts as a milestone, the roles of resistance (resistance line) and support (support line) can change; this is called Reg-Support (Res-Support) Reversal. It is also called a roll reversal.
For example, a line that was previously considered support is often viewed as resistance after a breakout.
After a line is broken, the movement of returning toward the original line direction is also called a return move.
The flow of Reg-Support reversal is
① Break the resistance line
→② Return move
→③ The former resistance line then functions as support and continues to extend in the direction of the break
.
when a support line is broken and turns into resistance → SOR (Support/Resistance) Reversal
(these terms are somewhat interchangeable, though the nuance differs for me as I understand their roles)
Line drawn at the Reg-Support (Res-Support) reversal point
I’ve explained resistance and support at length up to this point, so I’ll keep the main topic—drawing the line at the Reg-Support (Res-Support) reversal point—short!
In short, draw a horizontal line at the Reg-Support (Res-Support) reversal point!
When you actually draw it on a chart, it looks like this. ↓
“Resistance & Support Lines”
With this, the explanation of where to draw horizontal lines, as continued from last time, is temporarily finished!
This Reg-Support is very important, so on the chart, search for the Reg-Support reversal point and draw lines and think about it in many ways!
In line analysis, it’s not enough to just draw a line and memorize the rebounds or the patterns; it’s crucial to understand why it happens from the perspective of buying/selling awareness and embed that understanding.
If you want to study line analysis thoroughly from the basics to develop more advanced and reproducible trading, check this as well! ↓
→The essence of MTF Multi-Timeframe Analysis
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