I spoke earlier about why levels hold. I would like to expand on that if I may. In the chart below you will note that the price was below the weekly open most of monday and then during late NY and Asia it sort of raced up to that price level again. Millions of traders bought up there. There was perhaps hundreds of millions if not billions traded long at that level. Now Big institutional traders sold into all that buying. That is why the level held. Since most of the buying that took place there was retail and uninformed many of those people are still holding. What will they do when we get to that level again? After all they are poor retail traders, naturally after holding through a draw down of 160 pips they are going to sell. They are going to break even come hell or high water. That's why often the first return to a level will hold. We are nearing that level now, it may hold, it may not. It all depends on wether the millions and billions buying will overwhelm the millions and billions selling. Do we have some clues? Well yes ATR for one; we are stretched out to 115 pips so far today. Does ATR mean we cannot go higher? Of course not but it is a piece of the puzzle. We also know that this is a critical bull and bear decision line. These areas are often attacked pretty hard from both sides.
The truth:
We never know if a level will hold. We weigh the evidence, make a decision, and we place our trades. It is, after all just another trade and if the level fails and we are stopped out we will get a retest to go long. Trading is simple.
Hope it helps.
The truth:
We never know if a level will hold. We weigh the evidence, make a decision, and we place our trades. It is, after all just another trade and if the level fails and we are stopped out we will get a retest to go long. Trading is simple.
Hope it helps.