Support and resistance represent key junctures where the forces of supply and demand meet. In the... more Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. What Is Support? Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level.
A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, c... more A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots. On the chart, the yaxis (vertical axis) represents the price scale and the xaxis (horizontal axis) represents the time scale. Prices are plotted from left to right across the xaxis with the most recent plot being the furthest right. The price plot for IBM extends from January 1, 1999 to March 13, 2000. Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word " securities " refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easytoread graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between.
Support and resistance represent key junctures where the forces of supply and demand meet. In the... more Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. What Is Support? Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level.
A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, c... more A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots. On the chart, the yaxis (vertical axis) represents the price scale and the xaxis (horizontal axis) represents the time scale. Prices are plotted from left to right across the xaxis with the most recent plot being the furthest right. The price plot for IBM extends from January 1, 1999 to March 13, 2000. Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word " securities " refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easytoread graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between.
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