In today’s article, i’ll be showing you some advance level of support & resistance trading strategies.To understand today’s topic, The basics of drawing & understandings of support & resistance is required & So i recommend you to have a look at the basics in here before you start reading.
In 90% of my daily “chart on focus” post in blog,you’ll notice me marking “FLIP-support/resistance” on charts & our today’s topic is all about that. Most of the time flip support/resistance is found & well traded in a trend & also can be traded in flat as well as counter-trend market condition.Today i’ll explain trading “flip support/resistance” in a trend scenario & it’s going to be long article down there,so grab some pop corn & start reading !!!!
what is FLIP – resistance :
Whenever price breaks a support & start trading well below it , the same support area becomes FLIP-RESISTANCE
CHART – 01:
Here in the pic, “4” was a support area which got broken later & price reached at point “6” area.Now area of “4” will be called as a FLIP resistance which was previously acting as support. So we can look for selling opportunity on the flip resistance area now on point”7″.
SO – i’ll repeat the above statement with the points marked on chart now : Whenever price breaks a support(4 in pic) & start trading well below it (6 in pic) , the same support area becomes FLIP-RESISTANCE ( 7 in pic )
what is FLIP – support :
Whenever price breaks a resistance & start trading well above it , the same support area becomes FLIP-RESISTANCE
CHART – 02:
Here in the pic, point “2” was a resistance area which got broken later & price reached at point “4” area.Now area of “2” will be called as a FLIP support which was previously acting as resistance. So we can look for buying opportunity on the flip support area of point “5” now.
SO – i’ll repeat the above statement with the points marked on chart now : Whenever price breaks a resistance(2 in pic) & start trading well above it , the same resistance area becomes FLIP-SUPPORT ( 5 in pic )
Still confused ??????????????????????????????????????????????
Well, i’ve prepared a long story to make you understand this entire concept with examples.I’ll explain this entire price action story happening in market step by step as that is how i train my paid members/students with lots of chart examples.
Below is a chart of bajajauto & the stock was trading between august & sep when i started tracking. Now First thing i always look for a TREND present in the stock which i am tracking or trading.On this article.i dont want to talk much about TREND IDENTIFICATION part but still for the sake of understanding current concept i’ll explain a little about one of the finding procedures of a TREND – “Whenever you see a small downmove after a large upmove we usually say the price movement is UPTRENDY.Here in below chart you’ll see – “marked point 1 in red is a big buying push up ,then marked point 2 in blue is a small selling rally & finally marked point 3 in red is again a big buying rally up” hence we can see the buyers are more powerful in the overall market than sellers so we call the price momentum is in uptrend & in an uptrend we always try to BUY only & avoid SELLING the market.
Now coming back to our today’s topic, As our first job is to pick up the right stock to trade so We found a uptrendy stock BAJAJ-AUTO here.
Have a clear look of the same chart below without those red & blue lines drawings – a clean chart. Plain candlestick stick chart is saying “I AM MOVING UP “
Now, on chart below you can see price is falling from 2300 level towards 2200 area now. As price got a sell-off from 2300 level,we can mark the same level as “RESISTANCE POINT” ( as we learnt in basics of support & resistance trading)
Next day, price pushed back up trading inline with existing uptrend & crossed our marked resistance level of 2300 which we term as BREAKOUT(whenever price breaks a resistance area with strong momentum is called as BREAKOUT move).Now price is trading well above the old resistance point-2300. (Note : on chart-2 we discussed at the top, this 2300 area of resistance was marked as point 2)
Now as we discussed earlier, Whenever a resistance level(2300 level here) is broken & price starts trading above the old resistance(2300 level) , the resistance level becomes support for the current price & as it switches from resistance to support,we call it a FLIP & so it is called FLIP SUPPORT. In below chart, price reached back on the same area(2300 area of old resistance) from where it shot up & the same area(2300 area of old resistance) will be called as FLIP SUPPORT now. As price is on support & on support we always look for BUY entry opportunity as well as we expect price to move up from there.(Note : on chart-2 we discussed at the top this 2380 area of new resistance was marked as point 4 & flip support area of 2300 was marked as point 5 )
Now have a look at below chart – price jumped up from our flip support level & reached the first target of recently created new resistance around 2380( read basics of support & resistance trading to see how to define targets). So it was a nice play by FLIP SUPPORT area.(Note : on chart-2 we discussed at the top, the upmove from flip support area towards upside was marked as point 6)
Now below is what happened afterwards on this stock. After the rally up from 2300 area price pushed up till 2450 level & faced a sell-off towards flip support area of 2300 which made a new resistance area on 2450.Again price pushed up from KEY FLIP SUPPORT area( using the word key now as price moved up multiple times from 2300 area now & key area is covered in basics of support & resistance trading here) & landed up near target area of currently formed new resistance(2450 level).
Few days later again in below chart, we can see price moved up after a break of our currently formed resistance point(2450 area) & after a move up till 2550 price came back to retest the old resistance which turned into a flip support(2450 area) now. Price pushed back up from the flip support area again & reached target area of our new created resistance 2550.
And the pattern repeated back again for next few days. Hope now you can figure out the pattern going on in below chart without my explanations. The old resistance of 2550 reacted again as a flip support from where price moved strongly up & touched the new resistance target area of 2630.
Now here is a below chart i’ve shown the entire price action we traded in a single chart.We got 4 trading opportunities in this stock & all of them has hit the target areas & that is the power of TREND TRADING.We have never missed the trend & got chances to ride most of it’s upmove using FLIP levels. I hope you can understand now the power of using just two lines on charts – support & resistance.
Now, i’ll quickly show you an example of how we trade the same flip levels in case of trading from resistance in a downtrend. If you’ve already understood trading the flip supports in uptrend from above discussion, it will easy enough for you to understand how the flip resistance can be traded in a downtrend.
Again we’ll find a stock with downtrend first & here i’ve chosen MARUTI SUZUKI script to explain this topic.What is DOWNTREND ?? >> Whenever you see a small upmove after a large downmove we usually say the price movement is DOWNTRENDY.Here in below pic you’ll see – “marked point 1 in red is a big sell-off push down ,then marked point 2 in blue is a small buying rally & finally marked point 3 in red is again a big selling rally down” hence we can see the sellers are more powerful in the overall market than buyers so we call the price momentum is in downtrend & in a downtrend we always try to SELL only & avoid BUYING the market.
In below chart, once the support level is broken from 1130 area, the same old support level becomes flip resistance area where we can look for selling opportunities. Now on current market scenario, price is trading well below the old support level of 1130 area hence we are waiting for price to move back up 1130 area of old support which turned into a flip resistance area now & will try to find a sell-off signal from that area.
Now below chart shows what happened in next few days. Once price came back to test the new flip resistance(old support) 1130 area, price started selling off from there & reached previous support target area of 1050.From support area of 1050 price again pushed up & got rejections from flip resistance area of 1130 area again & had a large sell-off towards 1050 support.Finally price started moving in a flat market condition & we need to see the future price action in a different viewpoint from hereon.
Here is a quick video i recorded showing you some of my blog posts where i traded flip support & resistance levels.Have a look:
So , That’s the end of the long story. Hopefully you’re not bored & a few pop corns are still left with you for the summary section ahead !!!!!!!!!!
Pls note : the concepts i discussed here are the beginner level part of trading support & resistance & realtime trading on this levels need more detailed education which i cover in my training course HERE. I shared these concepts of trading i use & teach, just to show you the importance of these levels in daily market while trading & most importantly to explain you that “TRADING IS EASY”.We do not need lots of indicators drawn on charts or some magic formulas to make money in this market.Whatever happens in market, the market itself shows us via PRICE ACTION & you just need to read it & trade. Hopefully this article will clear some of your basic understandings of how to read the price action on charts .