Myth: If the price approaches a level repeatedly, and gets rejected from it, this means that the level is very strong. Reality: After each touch, the level becomes weaker and weaker due to the absorption of the residual orders.
Underlying logic:
1. Whenever the price keeps approaching a certain level, there are pending buy orders which are waiting to be filled. 2. Every time the price comes back to this level, a certain amount of orders gets absorbed. 3. More the price approaches that level, the lesser unfilled order remains. 4. Hence, ultimately all the orders get absorbed and we see a breakout/breakdown of that level.
Disclaimer:This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
I am following your posts from sometime and want to say that I learnt a lot going through your analysis. I am currently reading "Technical Analysis by John Murphy" and finding difficulty in applying concepts. Below are my problems and I am looking for your advice to overcome those.
1. I am randomly picking stocks and trying to apply TA. By doing like this, I am feeling a lack of direction and everyday I will work on new stocks.
2. If I stick to a single stock and look into its history for applying technical analysis, I am getting biased because I know it's current price already.
looking forward for your suggestions on "How to systematically practice Technical analysis?"
johntradingwick
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@Kalyan1122, Hi, you should keep following the first strategy. Keep applying TA on as many stocks as you can. But keep in mind that the stock must have sufficient liquidity, else it will have poor price action, like too many dojis and stuff. Working on new stocks shouldn't feel like a lack of direction, instead, it should feel like stepping stones in the right direction since this practice will help you to master TA, and then you can switch over to indices or a single stock.
Also, you can switch over to smaller time frames and make your chart. This will help you to improve at a faster rate.
something like this we saw in nifty index today(15 july,2021) itself that is., index breached 15900 level very swiftly in its first intraday attempt. Only because it has touched those levels in past about 3 times
johntradingwick
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@architk, Yes, I have posted about that too. You can check my other post.
I am following your posts from sometime and want to say that I learnt a lot going through your analysis. I am currently reading "Technical Analysis by John Murphy" and finding difficulty in applying concepts. Below are my problems and I am looking for your advice to overcome those.
1. I am randomly picking stocks and trying to apply TA. By doing like this, I am feeling a lack of direction and everyday I will work on new stocks.
2. If I stick to a single stock and look into its history for applying technical analysis, I am getting biased because I know it's current price already.
looking forward for your suggestions on "How to systematically practice Technical analysis?"