TECHNICAL ANALYSIS – TRENDLINE
TRENDLINE is a line made by joining picks(high) made in a price chart or by joining bottoms(low) .
RESISTANCE- When price of any scrip can’t go up above a certain level,then it is called resistance.
It happens due to big selling force on a particular price.A scrip has various resistance level for a period of time(time frame).Say silver is @cmp40,200 then R140450, R2-40680, R3-40860
R3 can be said OVERBOUGHT level,where fresh buying may be risky.
SUPPORT-When price of any scrip can’t go down below a certain level,then it is called support.
In above given example of silver S1 may be-40250, S2-40030,S3-39880.
S3 can be said OVERSOLD level,where fresh selling may be risky.
What is fresh buying/selling?
When any commodity falls by 6% and short sellers book their profit,then price may bounce by 1-2%.Price can’t be stable here,It goes down again. This buying is called”SHORTCOVERING”.
If FRESH BUYING is there ,then price becomes stable.It may break previous high.
In the figure given below ,
TRENDLINE’S blue part is working like a support
& red part is like resistance.
In INTRADAY timeframe ,when you see chart of any commodity by ctrl+i
then notice this-
if any strong support breaks at time of data(2.30/8.30pm)
then it will becomes very strong resistance.
STRONG support or resistance means price chart may be touching that line and reversing back
So above trendline- buy on every dip near trend line and keep the stoplosses below trendline.(blue arrows shown in fig)
below trendline- sell on every jump near trend line and keep stoplosses above trendline (red arrows shown in fig)
Notice next day on screen, If any commodity is in buying ,It’s average will improve every hour,
means ATP of NG was 222.5,then it became222.9 & 223.4. This confirms strong buying.
In Selling case, ATP goes below every hour.