Page 136 - THE MARKET WHISPERER
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134 PART 5 - Principles O f Technical Analysis
and selling when the stock price is low [2]. They pray that it will go back
up to its breakdown point [3] when they will happily sell. When it does,
they will also be among the sellers establishing resistance [3].
Summary:
If a stock rises to its retest point [3], it will usually encounter resistance
originating in the common interest of all those operating in the market at
the time: sellers. This shared interest turns support into resistance.
High and Low Points
The high and low points also serve as areas of support and resistance, both
on intraday charts and daily charts.
High – Turning into Resistance
Why does a high [1] create resistance when the price returns to the
same [2] point?
To understand this, we need to penetrate the thoughts of buyers more
deeply.
Every point on the chart represents both buyers and sellers. The same
is true for when the stock reaches its high [1]. Of course, buyers at that
point still do not know they have reached the peak price, and in a show
of enthusiasm over a strong stock, they buy at this high, hoping the stock
will go up. In actuality, when they discover that it is dropping, they are
