Breakouts and Proximity to Resistance or Support
Perhaps the strongest signal of reversal, especially for swing trends, is the breakout above resistance or below support. If this occurs with strong gapping action through the border, reversal is more likely in this location than anywhere else in the trading range.
This observation dominates timing used by swing traders. The observance of resistance and support is the key to timing of trades with reversal in mind. As long as continuation signals do not counteract this observed phenomenon (breakout with gaps), reversal is highly probable. However, what does it mean for managers of long-term or permanent portfolios?
The activity of moving in and out of equity positions often is contrary to the goal ...
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