Classic Techniques  |  JUL 2000

The Strength Of Support And Resistance by Christopher Narcouzi

The Strength Of Support And Resistance by Christopher Narcouzi Measuring Overhead Supply Here's how to quantify support and resistance so you can get a good idea ahead of time whether they will hold up when tested. Stocks run up and down between support and resistance lines. Sometimes they break through support and resistance, and sometimes they back off. Usually, they back off if the support or resistance is very significant. You can quantify support and resistance using volume around previous tops and bottoms. Here's how to measure the significance of support and resistance so you can get a good idea ahead of time whether they will hold up when tested. SUPPORT AND RESISTANCE ZONES Some people treat support and resistance as exact points. If the resistance line is at $75 and the stock rallies to $76, then they consider resistance to be broken. This is not correct. Resistance should be expected in the vicinity of $75. The stock may meet resistance anywhere between $73 and $77. Support and resistance should be considered approximate areas and not precise points. Think of support and resistance as zones.

by Christopher Narcouzi