SUPPORT/RESISTANCE CONT.
CLICK THE HEADLINE ABOVE FOR GBP/USD CHART. (click on charts when you get to the page)
Support/resistance is relevant to tops and bottoms.The basic terminology is overhead resistance and bottom support. Wherever price is positioned, the closest price top above it is the 1st level of resistance. The closest price bottom below is the first level of support.
But, before one can see S/R one must know what constitutes a market top and a market bottom and it is not necessarily the highest price that creates a top nor the lowest price that creates a bottom. The LCM technique of pivot recognition identifies a true top or bottom.
That is the most fundamental reality of support/resistance.Then you have separations into major support/resistance and minor support/resistance. The definition above illustrates majorsupport/resistance.
Then you have minor support resistance. For example; the closest market top could be 200 pips overhead. That is major resistance.
But 100 pips overhead, before that market top, is a prior market bottom. This prior bottom is also overhead resistance but it is classified as minor resistance. This functions oppositely on the way down.A move that is with the trend can be expected to break through minor resistance and test major resistance.
A move against the trend can be expected to be stopped by minor resistance.When a market hits support/resistance there will occur a reaction. The reaction can be read by the pattern that forms at support/resistance and knowing how to read the reaction will tell you if price will proceed to the next S/R level, bounce off and then recover to continue through the level, or reverse off the level to test S/R in the opposite direction.
To be continued.
Jerry
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