Automated Support And Resistance by Mel Widner, Ph.D.
Support and resistance analysis is a proven method for selecting key price levels for trading decisions; traders usually perform the analysis by hand. The automatic charting method and new oscillators presented here are easy to implement and give a precise comparison of price to these important levels.
Sir Isaac Newton’s first law of motion is one that is familiar to us all, stating that “Every body continues in its state of rest, or in uniform motion in a straight line, unless compelled to change that state by forces impressed upon it.” It is relevant here, because the same can be said for price behavior. Like physical objects, prices have inertia and momentum. When at rest, prices often stay at rest, building congestion. When in motion, prices often stay in motion, along a trend. But like Newton’s apple, price momentum changes when market forces are applied. The influencing event is sometimes known and sometimes not, but in any case cannot be hidden and can be seen in the price. Prices will often move in one direction for a period, only to stop and flatten or move in the other direction. This occurs because market forces have changed the momentum. The turning point has significance for future price behavior.