Talk:Resistance (technical analysis)

Opinion

"For this reason, the stronger the resistance, the less likely the price will break through that level."

Opinion!! What about facts? GT

Resistance

In futures, resistance is an area where we expect contracts, will be sold short, or liquidated. That is it. By itself it does not suggest any action. Both buying and selling influence prices. Having only one side of that does not indicate price direction. Just because selling comes in does not mean there is enough pressure to influence price. There is only one thing that can make prices go up and that is buying. Often we have an area bounded by what are called support and resistance. Very often we get divergence buy signals near support from various oscillators that lead us to believe that buying pressure is substantial and that an up thrust is enviable.

If people believe what is written here, they may be selling into heavier buying. Resistance will only slow a price rise if the buying is about the same, or less than the selling that is likely to take place. However, when there is substantial buying this area will not offer any resistance to rising prices. In fact professionals are depending on the miss informed public to not only sell, but also subsequently “cover their shorts,” leading to still higher prices.

It seems to me it should not be the function of this post to lead sheep to the slaughter. A resistance area may be a place where we expect sales will take place; it does not mean this is where a trader should sell. It does not mean prices will stop here or turn around here, although they might. GT

Smoke in a windstorm

Futures are not like stocks. Stocks can fall to zero, commodities cannot. A stock certificate has no intrinsic value other than the paper and ink that make it up. It is possible that the resistance area over stocks may not ever be broken. However due to the inevitable disintegration of paper-backed currencies it is close to an absolute certainty that given time, commodities will see new highs, blasting away so called resistance like "smoke in a windstorm." It is a disservice to traders to try to group Investors and Speculators, Futures traders and Stock operator's, definitions together with out clearly separating each. GT