The Strength Of Support
And Resistance by Christopher Narcouzi
Measuring Overhead Supply
Here's how to quantify support and resistance so you can
get a good idea ahead of time whether they will hold up when
Stocks run up and down between
support and resistance lines.
Sometimes they break through
support and resistance, and sometimes they back off. Usually, they
back off if the support or resistance is very significant. You
can quantify support and resistance using volume around previous tops and bottoms. Here's
how to measure the significance of support and resistance so
you can get a good idea ahead of time whether they will hold
up when tested.
Some people treat support and resistance as exact points. If
the resistance line is at $75 and the stock rallies to $76, then
they consider resistance to be broken. This is not correct.
Resistance should be expected in the vicinity of $75. The
stock may meet resistance anywhere between $73 and $77.
Support and resistance should be considered approximate
areas and not precise points. Think of support and resistance