Finding Strong Support & Resistance Part 1 · 1. Identify Stronger Levels of Support & Resistance 2. May hide lower level zones of support & resistance Daily Charts 1. Starts Refining

Finding Strong Support & ResistancePart 1

From the Active Trend Trader

DisclaimerU.S. GOVERNMENT REQUIRED DISCLAIMER – COMMODITY FUTURES TRADING COMMISSION

FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALS O LARGE

POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN

ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS.

DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION

NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION I S BEING MADE

THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE

DISCUSSED IN THIS TRAINING. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR

METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN

LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESU LTS DO NOT

REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN E XECUTED, THE

RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN

MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PRO GRAMS IN

GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF

HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY

TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

ALL MATERIALS PRESENTED ARE FOR TRAINING PURPOSES ONLY . TRADERS SHOULD PAPER

TRADE ANY NEW METHOD PRIOR TO RISK OF PERSONAL CAPITAL.

Copyright 2007-2016 Active Trend Trading

Why should we care about strong levels of support &

resistance?

- Defines when to take action

- Strategically plan entries

- Strategically plan exits

But the big reason is:

- It’s about defining RISK!

- And being just close enough is not enough!

But which are the strongest? The one’s that the

Institutions support

The Challenge:- Knowing when to Act

- Knowing when to sidestep and wait – Confluence of Clues

- Often the more things on our charts the more contradictions

- We must learn how to look for opportunities & plan based on what we see

on the charts

- The problem: When the chart looks the safest is when it typically is not—It’s

most dangerous

- We want to buy when it is early & scary then sell when others think its safe!



There’s an old adage in Real Estate: “You make

your money on the buy!”

- This applies equally to stocks/ETFs/Options

- Start developing your process to act at levels where the risk is

low and definable

- When you buy a house you define a price you are willing to

pay and stick with it within limits

- Do stocks the same way—but how much should you pay? We

must depend on the charts & tools to know.


Support & Resistance come in various flavors, but:

1. Horizontal Support and Resistance is the strongest,

but:

2. Which is the best levels? It depends? It’s the level

the Institutions come in and either buy or sell!

How do we define levels? This takes practice, most

want to be traders will not take the time to learn how

to use the tools!


How do we define levels?

- What are the tools

- Charts—But this only tells us what has happened

- Fib Retracements & Extensions & Clusters

- Timing

- Expected Moves based on Standard Deviations

- Trader’s most important 2 genes: Patience & Discipline

Base on what we learn from using the tools we can:

1. Plan Key Levels in advance

2. Plan action around these key points


Charts

The Longer the Time Frame the Stronger the Level

Weekly Charts

1. Identify Stronger Levels of Support & Resistance

2. May hide lower level zones of support & resistance

Daily Charts

1. Starts Refining Some Levels into Zones of Support & Resistance

2. Use for triggers on weekly signals both initial and continuation

Intraday Charts (30 & 60 Minute Charts)

1. Further Refining Some Levels into Zones of Support & Resistance

2. Use for triggers on Daily signals both initial and continuation

3. Daily or Swing or Trend timeframes

4. Establish initial targets


Chart Levels of Support & Resistance


Weekly Chart of SPY

Where are the levels of

Support & Resistance?

Resistance converting to Support

Support Every time for over 2 years

But what about the minor levels?



Daily Chart of SPY



Support Zone

Resistance converting to Support

But what about the more minor levels?

Resistance



Resistance

1 Hour Chart of SPY



Support/Resistance Zone

Resistance Zone

Use the Intraday to plan Entries

Finding Strong Support & ResistancePart 2

From the Active Trend Trader

Fib Retracements/Extensions/Clusters

- Each type of Fib is valuable on it’s own but when prices come together in

clusters its even more valuable

- To look for clusters want to do at least 1 Retracement & 1 Extension

- Look for most recent significant Low-High or High-Low Run

- Look for most recent Zig-Zag to do the Extension

- Works on any timeframe

- Adds additional confluence with established levels of support and

resistance




JUNO Daily Chart

Clean it UP!



JUNO Daily Chart



JUNO 1-Hour Chart

Go to Naked Charts


What are the probabilities During the Trade?

- Expectations are provided with each Option Chain

- +/- 1 Standard Deviation based calculation including Implied Volatility and

other variables

- This translates into the probability of 70% that price over the number of

days until expiration will stay within +/- 1 Std Dev of current price

- Constantly being calculated

- How can we use this information?



- How can we use this information?

- When can we expect targets to be reached?

- Planning when to sell options and what options to sell (covered or uncovered)

- Specific Details next week, but here a clue for selling weekly options



- Weekly Options on TSLA

- On Thursday or Friday look at the Weekly Options expiring the next Friday

- Why? This is when the Institution start putting the hedges in place

- Near the end of the day on Thursday- Identify Current Price

- Identify Current Expected Move

- Do the Math

- Go to the chart & plan your trade!


What are the probabilities During the Trade?Near the end of the day on Thursday

- Identify Current Price

- Identify Current Expected Move

- Do the Math


Current Price = 205.22

Expected Move between now and next Friday = +/- 9.472

+/- 1 Std Dev on TSLA = $214.69 - $195.75






+/- 1 Std Dev on TSLA = $214.69 - $195.75






+/- 1 Std Dev on TSLA = $214.69 - $195.75

- How Much Premium do I need to collect each week? $485/Week

- If I sell the Options at the 1 Std Dev away how much will I make?

- 30Sept 215C = 0.96 or $96 per contract

- 30Sept 195P = 1.50 or $150 per contract

Even both expired worthless, this equals $246

So what is my decision at this point?

1. Sell closer to current price based on potential direction?

2. Wait for a surge near a Std Dev away?


Price & Time Symmetry

Often Price Action will show both Price and Time Symmetry

- In other words price will move approximately an equal distance in

approximately an equal time

- Becoming aware of these traits can help a trader establish expectation for a

move

- This phenomenon happens due to the composite of all who are trading the

stock/ETF

- These provide us an estimate of what may happen & when

- Can work on all timeframes


Price & Time Symmetry


A

B

A-B = 27.98 in 71 Days

C-D = 28.83 in 20 Days

E-F = 23.00 in 70 Days

G-H = 23.11 in 28 Days

B-C = -25.28 in 28 Days

D-E = -36.00 in 84 Days

F-G = -35.43 in 61 Days

E

C

D

F

G

H

Both Big Swings & Small Swings

Next Time

Tie it all together with strategic trades when it’s most scariest!


Clarify, Simplify & Multiply

This has been the Motto of Active Trend Trading from the beginning!

We continuously work to Clarify & Simplify through refinements to the system to make it objective and easy to both learn and use.

The purpose of all presentations is to provide our fellow Active Trend Trader Members a jump start to accelerate progress up the Learning Curve.

We welcome suggestions on how to improve the learning process!

Trade Wisely & Profitably,

Dennis W. Wilborn

Founder & Lead Technical Analyst

Finding Strong Support & Resistance Part 1 · 1. Identify Stronger Levels of Support & Resistance 2. May hide lower level zones of support & resistance Daily Charts 1. Starts Refining

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