![]() (I’ll save that for a later discussion with my members.)Īt any rate, the idea here is to watch how the market responds to support or resistance within a given period. That would make the opposite “light” price action, which doesn’t have the same ring to it. I suppose I should come up with a better word for it since the word heavy only applies to a pair that is putting pressure on a support level. The idea of heavy price action is something my members have become very familiar with over the years.Īs the term implies, this is when a market begins to put constant pressure on a key level over a short period. Last but not least is when price action clusters near a key level. In some ways, this is a combination of the two techniques we just discussed. Clustering Price Action: An Early Warning Sign The illustration below shows a trending market that is respecting a trend line, however, the distance between each retest has become shorter over time.ģ. More specifically, the relationship the highs and lows have with our key level. While a market that continually revisits the same area can eventually break through, we don’t have enough data to conclude that it is likely.įor that, we turn to (you guessed it), highs and lows. So if we can agree that multiple retests of a given level do not make it stronger, we can naturally conclude that it makes the level weaker, right? Because if it didn’t break on the third retest, why would it break on the sixth when it’s supposedly twice as strong? Think about it, if this were true – that a level became stronger with each additional retest – it would theoretically never break. Multiple retests of the same level make that level more visible, they do not make it stronger.Īnd visible and strong are by no means synonymous. I hate to be the bearer of bad news, but that’s a complete and utter fallacy. Someone at some point in time came up with the notion that support and resistance levels become stronger with each additional retest. ![]() ![]() There is a common (and costly) misconception among traders in all markets where technical analysis is a traditional method of trading. Now that we have discussed how to use swing highs and lows to gauge the strength of a trend, let’s add a key level into the mix. ![]() Distance Between Subsequent Retests: A Killer Way to Determine Trend Strength ![]()
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January 2023
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