Support, Long*
Ideal Market
Basing for some time at a clear support level for the entire market
Enter
Above Support Level (previous low)
Stop
10% below the Support Level **
Target
62% Retracement
Stopped Out?
Trade Support, Short unless a consolidation has formed due to this swing. If so, proceed to Consolidation, Short.
Trade Management
At 50% Retracement, move stop up to 38%. At 62% Retracement, move stop to 50%, at 75% move to 62% or exit the trade.
Support, Short*
Ideal Market
Market is failing and dropping through a support or consolidation level.
Enter
Below Support Level (previous low)
Stop
10% above Support Level
Target
38% of the way to the next significant low.
Stopped Out?
Trade Support, Long unless a consolidation has formed due to this swing. If so, proceed to Consolidation, Failure
Trade Management
Exit at 38%.
* For Resistance, invert the diagram and replace "Support" with "Resistance", "Long" with "Short" etc.
** All percentages are based on the Previous High at 100%. If a Previous High is not available to measure from, calculate a target and establish that as 62%. Base the 10% entry zone as 1/6 of this value.
"...there is a tendency for relative highs and relative lows to be concentrated in relatively narrow zones. These zones imply support regions if current prices are higher and resistance areas if current prices are lower. this approach is particularly useful for anticipating support and resistance areas in long-term charts."
Jack D. Schwager
Schwager on Futures
Technical Analysis
"Whenever a support or resistance level is penetrated by a significant amount, they reverse roles and become the opposite. In other words, a resistance level becomes a support level and support becomes resistance."
John J. Murphy
Technical Analysis of
the Futures Market