In this lesson, I will discuss the knowledge related to the resistance and support levels of K-line movements.

Let's start with support levels. What do the support and resistance of stock prices represent? They represent the outcome of a tug-of-war between buying and selling forces.

Support Level: If the price, moving from high to low, finds support at a certain point, we generally call this point a support level.

When the stock price is falling, and the market absorbs the selling pressure, the buying force begins to push the price up. The result of this tug-of-war is that the price stops falling at this point and rebounds upward. We usually refer to this point as a support level.

Resistance Level: Similarly, when the price is rising and encounters resistance at a certain point, what does this indicate? As the market absorbs the buying power during the K-line's upward movement, the selling force gradually starts to exert its influence, suppressing the price. The outcome is that the price stops rising at this point and falls back down. We generally call this point a resistance level.

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Resistance levels are typically associated with selling, while support levels are associated with buying, thus forming our common operations.

During a wave of stock price movement, we usually also combine the golden ratio or Fibonacci's horizontal indicators, sensitive points in time, which can also accompany and support the probability and effectiveness of support and resistance levels!

When the stock price falls to a certain position and finds support, if this position is a key golden ratio point, such as a half or 0.618 position, we consider the support to be more reliable. Especially when it coincides with the horizontal Fibonacci sequence of 1-3-8-13-21 and beyond, this increases the reliability even more.

When we encounter a support level, we need to pay attention to the position of the rebound, whether the stock price's position forms a resistance with the bottom or a platform formed before the fall on the left side. Is it an effective breakthrough?

If it cannot be effectively and quickly broken through, it is very likely that the platform formed during the previous falling process will become a resistance level, thus continuing the original downward trend for the next wave of decline.In the actual operation process, after a support level receives support and rebounds, if the decline is too rapid and the rebound after receiving support is relatively flat, then it is highly likely that it will encounter a resistance level and form a sharp decline afterward, which is what we often refer to as a slow rise corresponding to a sharp fall.

In the construction of the chart pattern, we form a rebound of a downtrend segment, where the rebound segment is smaller than the downtrend segment, and the continuation of the decline afterward. Both the duration and the space of the continuation will have this characteristic, which is the common abc structure.

Especially after the decline sets a new low, if this wave of rebound is still relatively flat, then it will brew a larger downward space for the next wave, continuing the bearish force for the downward trend. Therefore, for support and resistance levels, we must dialectically view the slope and angle of the stock price movement between the two. If it accelerates upward and breaks through the resistance level, and then receives support after retesting, it may form a reversal and will not continue to decline.

How do we apply support and resistance levels in actual operations?

I have already mentioned one point. In fact, support and resistance can refer to a specific price, such as gold at 1300 or 1303. It can also be a range. Taking our current example, the price of gold in the US market is between 1303 and 1305, which is a huge resistance level and also a high point of a large wave rebound from the long term to 1211-1219. What we actually choose here is a range, that is, around 1303, which is a small range from below 1302 to above 1305. This indicates that support and resistance levels can be a specific point or a range, not necessarily a particular price.

Moreover, the longer the price stays at the resistance or support level, the more tests it undergoes, the more important that resistance or support level becomes.

When the stock price stays at the support or resistance level for a long time, it forms what? A narrow range platform. Therefore, this resistance or support level will be very important, and after the market chooses a direction, there will generally be a significant trend.

Support and resistance can also be converted into each other. How do we understand this?

It is what we often say, once the support level is broken, when the stock price runs upward again, this support level—the original support level—becomes the resistance level for the future market. This refers to the mutual conversion between support and resistance.

The resistance formed by the price after the support level is broken, and the support formed by the price after the resistance level is broken, this is a common result of the transformation between the two.Additionally, resistance and support are related to people's psychology and habits. Generally, we have a psychological expectation for prices, which we call the psychological price level.

There is also a phenomenon at round numbers, such as gold, why at 1303? In fact, the position at 1300 is a significant round number price. Round number prices are very likely to form a relatively large resistance, so at this point, we usually choose to enter the market, going long or short.

Once the price breaks downward, breaking the support level, we stop the loss in time. If it breaks upward, we buy the pressure level that has broken upward. We were shorting at this point, but as long as it breaks, we stop the loss in time, both can achieve a small stop loss.

However, if our operational direction is correct, we can achieve a significant profit, which can realize a small stop loss and a large profit-to-loss ratio. This is a common technique for operating with support and resistance levels.

There is also a switch between support and resistance levels. For example, in an upward trend, after the stock price forms a sharp peak and then turns back up, if it breaks through the high point on the left side of the previous peak and then retraces, the stock price is still higher than the highest point on the left side. After the retraction, the lowest point is still higher than the highest point on the left side, and then it turns back up, we consider the previous resistance level to be effective, and the resistance level has become the support level for the later market.

Similarly, during the downward process, when my downward trend forms a V-shaped rebound on the left side, and the rebound distance does not exceed the left side, it turns back down and breaks the previous V-shaped low point, and then the rebound in the later downward process does not exceed the previous support point, then the previous support has become the resistance for the later market. This is the switch between support and resistance.

In the specific process of switching, the application of support and resistance, there is also a point that is to buy at the support level and sell at the resistance level. This is the foundation of our technical analysis and should be combined with trend theory.

Generally, we do not use it alone; we need to combine it with the trend. In an upward trend, we look for support levels, that is, when an upward trend is formed, and the stock price retraces downward, we look for support levels to enter the market and go long, which is called buying on the retraction.

In a downward trend, we look for resistance levels to go short, which is selling on the rebound, that is, the buying and selling between resistance and support must be combined with other theories, especially the trend theory.

The above is an explanation of our approach to support and resistance levels and the application methods of support and resistance. Welcome everyone to follow, like, and share!