Horizontal Support and Resistance Should Catch Your Eye

Scanning for opportunities based on charts is never really easy. In fact, sometimes it can be quite difficult. But if you keep in mind that support like resistance has a better chance to hold than break, you will be a better technical analyst. To me, one of the easiest things to do is to scan for horizontal support and resistance on all time frames.

With Experience…

The more you look for support and resistance the better you will get…I promise. When my mentor worked with me way back when, I remember I thought I would never be able to scan and pick out those areas the way he did. But over time, I got really good at it. As is the case with a lot of things about option trading, experience cannot be taught.

Support

Take a look at the chart just below.

Notice that every time it came down to the white line that acted as horizontal support, the stock moved higher again. Use the tools that come with your trading platform and draw a straight line. Move the line up and down until you find an area on the chart where the stock reversed off the most. That’s it. It is that simple!

Resistance

It is just as easy to find potential horizontal resistance areas too. Take a look at the chart below.

Several times the stock rallied up to the white horizontal line that acted as resistance and kept the stock from moving higher again. Remember, nothing is perfect and it is an art not a science. There is no way to draw the line perfectly. Just do the best you can. The wicks and opens and highs do not all have to line up perfectly.

Finally

Finding support and resistance on charts can give you an edge in your trading. Start by looking for the horizontal areas and then over time, look for trend or slanted support and resistance levels, which are harder to see. If you plan your option strategies based on these levels, you should stand a better chance of being right.

John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.