S&R = Stochastics and RSI??
I see trendlines, support/resistance lines, and MAs as just different types of resistance lines that define the terrain that price movement occurs on. One difference that I found with MAs over other forms of resistance lines is that the MA (particularily the longer MAs like 200) have a more global influence on the price action of the stock.
For example, I found that if the price of the stock is near the 200 day moving average, it tends to move to at least meet this MA before moving downward. This is also true for stocks that broke through their 50 day MA. The 200 day MA in this way seems to act as a "magnet" for the price. I think this makes sense because crossing the 200 day MA has significance to alot of investors.
Stocks behave differently when they are on a downtrend compared to when they are in an uptrend. For instance, I find a certain degree of "robust" behaviour from a stock to outside negative influences like a down market day compared to when the stock is trending downward. On a downtrend, a stock appears to be more resistant to upward movement. A stock with a downward sloping 200 day MA appears to take on some of the behaviour of a stock that is in a downtrend. For instance, if the stock is rising where the 200 day MA is downward sloping, this appears to liimit the potential upward movement of the stock. Also, I have found examples where the the uptrend of the stock not only to be limited, but also more easily reversed by events such as a market spill. This particularilly appears to happen if the 200 day MA is sloping into the region where the price of the stock is before its uptrend.
Anyone else witnessed this behaviour of stock prices in this type of situation?
I think an awareness of price patterns helps, besides the use of trendlines, support/resistance lines, MAs, and S&R. However, I use them as another type of indicator to back up what I see is happening with the stock. Price patterns with volume analysis I find does help give me at least a qualitative view of the stock in terms of its reflection of the underlying actions of the investors in the stock.
I find it particularily interesting and worthwhile to locate resistance lines that are not readily apparent which do impact the price action of the stock. This can be trend lines from former trend channels, apparently "weak" trendlines that the price action of the stock does bump up against in its price movement which on occasison do turn into your more classic support or resistance line, and resistance lines that are angular to the price action of a stock within a trendline. In the latter case, I found circumstances where after the price breaks out of the trend channel, the new trend channel is made from these resistance lines.
I thought this would be a good place to throw these ideas of mine out for comment by all of you here.
Any feedback or comments here? |
