Support Becomes Resistance and Vice-Versa
As prices change with time, they are traversing previous points of interest and take on new areas as time passes. What defines an area of support or resistance? There are many “official” definitions for this critical market tool; however, in my opinion, the safest way to identify support or resistance is by seeing if the market likes an area as prices move up and down. If the market likes an area, there will be activity happening there for both sellers and buyers.
Below is an image where support and resistance areas are selected from a daily time frame. Note how price pauses at certain areas as it moves up and down.
It is that simple of a process. The key is to keep in mind that markets are dynamic, and therefore, areas are preferable to precise levels. If the market stops at 100.25, that does not mean that selling or buying at 100 was no good. What matters is the market context of the trade. Letting the market show us what areas matter specifically is our job once we are analyzing the market.
Below is an image where support and resistance areas are selected from a 233-minute time frame. Note how price pauses at certain areas as it moves up and down.
While the market respects the daily time frame areas, note how it creates new levels of support and resistance on the 233-minute time frame as well, and so on. The smaller our time frame focus becomes, the more support and resistance areas you might be able to identify as prices change over time. Note that even though there might be new support and resistance areas, price still gravitates to the bigger time frame areas.
Below you will find images showing 55-minute areas of support and resistance colored in purple, as well as 13-minute areas of support and resistance colored in light brown.
