RANGE ANALYSIS
Range is the distance between support and resistance for current price action. It is the space between the top and bottom of recent activity. To identify support and resistance of price and thereby its current range, you need at least three points, but in many cases, range will provide you with many more, clearly outlining support and resistance.
In an uptrend, you will need at least two points to identify resistance and at least one point to identify where support likely is. You won’t know if it is support for sure until it is retested, but you can anticipate that it may be.
In a downtrend, you will need at least two points to identify support and at least one point to identify where resistance likely is. You won’t know if it is resistance for sure until it is retested, but you can anticipate that it may be.
Honing on the Range
Price moves in waves. Even if the long-term trend is up or down, price will move in the direction of the trend in waves. Each wave has a peak and trough. A peak will consist of a candle or small group of candles that create a higher high. A trough will consist of a candle or small group of candles that create a lower low. See Figure 10.1.
The range is the distance between support and resistance peaks and troughs. So, while in a range, it is a good idea to identify support and resistance. To do so, it may be helpful to draw horizontal lines at points where peaks and troughs seem to be level, such as the double bottom in the preceding ...
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