Reviewing Support and Resistance.

Let’s continue reviewing support and resistance.

Support and Resistance Can Reverse Roles

Another thing to remember is that when the price passes through a resistance level, that resistance might become support.

The same could also happen with a support level. If a support level is broken, it could potentially become a resistance level.

We know this concept as “role reversal“.

Trend Lines

In their most basic form, we drew an uptrend line along the bottom of easily identifiable support areas (valleys).

In a downtrend, we drew the trend line along the top of easily identifiable resistance areas (peaks).

There are three types of trends:

1. Uptrend (higher lows)
2. Downtrend (lower highs)
3. Sideways or trend less (ranging or flat)

Trend Channels

There are three types of trend channels:

1. Ascending channel (higher highs and higher lows)
2. Descending channel (lower highs and lower lows)
3. Horizontal channel (ranging)

To create an up (ascending) channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to a position where it touches the most recent peak.

For a down (descending) channel, simply draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley.

To create a sideways (horizontal) channel, simply draw a parallel line at a zero or flat angle.

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