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Here comes a really important point. If you want consistent success in the market, you have a job to find out who is winningthe buyers or the sellersand to trade accordingly. That's what charts are good for! One of the best ways to see who is winning the battle between buyers and sellers is at points of support and resistance. Support and resistance define natural boundaries to the price of a stock. |
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Where buyers are strong enough to keep prices from falling further, you find support. Remember, you don't care about the reasons why the buyers are buying. You just want to be able to observe the support and take advantage of the fact that they are doing it. Look at the chart in Figure 12.14 to see that every time the price declines to the support level, the buyers start buying and the price is prevented from falling further. |
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Figure 12.14
Support Chart
Copyright 2000, TradeCast® Ltd. |
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