We can identify major support and resistance using tools like horizontal line, pivot and round levels. Other tools like Fibonacci and Fibonacci extension as well we can use to identify support & resistance.
Finding Support and Resistance by Looking at Historical Pivot Levels
We can see that after HDFC BANK strong resistance near the 1523.9 level four times in the 1 hour time frame. While the HDFC BANK managed to break above the 1523.90 level once, the bullish momentum faded quickly and within two days, resumed bearishness.
If you simply drew a horizontal line at the round number 1523.90 it will work as resistance.
“Historical support and resistance zones work because traders psychologically anchor their decision”.
Finding Support and Resistance by Daily Calculating Pivot Points
Pivot points are mathematical computation levels based on the previous day’s high, low, and closing prices. Since a lot of large professional and institutional traders use these levels in their trading, pivot act as major support and resistance levels. These levels are important, especially, if you are a day trader and trade on 60-minute or even 5-minute charts.
We have used a built-in pivot point indicator to draw the S1-S3, R1-R3. While these pivot points are based on the previous day’s high, low, and closing prices, these are only relevant for today’s market.
Anticipate Support and Resistance around Big Round Numbers
We can see a 1 hour chart of the HDFC Bank. Based on the historical price action, we have drawn four major support and resistance levels on the chart. As you can see, the Big Round Numbers like 1500, 1400, 1450 near, 1550 near all acted as major pivot zones, providing support and resistance to falling and rising prices, respectively. If you are new to trading and do not know how to correctly draw horizontal support and resistance levels, always round up to the next Big Round Number.
This is it for this Blog, If you have any questions please write down below in comment section. I would love to answer them. See you soon…