Detect Fakeouts

When the price finally “breaks” out of that support or resistance level, one would expect the price to keep moving in the same direction as the break. There must have been enough momentum building up for the price to have broken out of the level, right? It’s time to hop aboard that train. It’s all smooth sailing now. All you have to do is wait for it… Please wait for it… Just a few more moments… To see price in one direction… Then suddenly move miles in the opposite direction!

Support and Resistance Levels Are Tricky

You should note that support and resistance levels are areas where a predictable price response can be expected. Support levels are areas where buying pressure is enough to overcome selling pressure and halt or reverse a downtrend. A strong support level is more likely to hold up even if the price breaks the support level, providing traders with a good buying opportunity.

Resistance levels are just like support levels but work oppositely. They tend to halt or even reverse uptrends. Resistance levels are areas where selling pressure is enough to overcome repurchasing pressure and force prices down. Intense resistance levels are more likely to hold up even if the price temporarily breaks the resistance level, providing traders with a good selling opportunity.