1 Page 2 Page 3 Page 4 One of the most challenging areas for day traders is to learn how to determine entry and exit points for trading. Earlier, we examined how to determine exit points on a bounce. In this section we will examine how to determine support and resistance and using this as a means to determine entry and exit positions.
Resistance levels are pricing levels that a stock has trouble penetrating.
Think of resistance levels as flood gates that are closed tight. Once they are opened, they release an extreme amount of potential. Support levels act just the opposite, they are the pricing levels that hold up or support the price points. Again, once the gate is open, stocks have the ability to crash through these support levels and tend to decline rather rapidly. The charts on the following pages show established support and resistance levels.