Picking Tops & Bottoms With Support & Resistance?

I'm very skeptical about the ability to pick even approximate market tops and bottoms, by far the hardest, if not impossible top or bottom to pick is when a trend will end.

But what about a correction, is it possible to pick the end of a correction with support & resistance? What do people think? Chart patterns would suggest the EUR/USD has just put in a short-term top at around 1.3600.

Lets see what happens...

Nice chart...

I've watched it form for the last few days now, and today hit the trend line. Surely if tops and bottoms can be picked this must be one of those times it can be done, right?

But a little part of me is just not convinced that it can be done - still feeling bearish though, but on the EUR/USD nothing beats a new 80-day high or low...

Of course it is possible to pick tops and bottoms, at least approximately, to a decent accuracy level but you need to combine the right information to build a complete picture of the market sentiment at the time price reaches the S/R level you are looking at. If you use only S/R you will have a lower accuracy rate because you will not be aware of events that could invalidate that particular level.

Look at the where price is now. What other significant levels does it align with? More importantly what is currently happening in the market? Are there news events due that could see price roll straight past your chosen level? Is you chosen level a point where the major players are likely to have large orders stacked up? How did price get to that level? Did it creep up there or shoot up to it like a rocket? etc etc...

Once you can answer these types of questions then you will start to see which S/R levels have the highest probability of being market turning points. If you just pick them at random because a few points align you are just rolling the dice.

A little late to this discussion but would like to see this thread keep going a bit.
I agree with you David, trying to pick tops and bottoms is a tough thing to do.
Apparently 3600 ish was not a top........

It seems that on pair like the EUR/USD that trends well, people can almost never pick a top or bottom, therefore it's better just to go with the trend.

The EUR/USD has been rising for a long time, but according to OandA's open positions ratio retail traders have been net short for over a month. They must be gambling that this time this is it, and then the market moves against them. Then they repeat the exercise, call a top, bet against the trend then watch as the trend washes over them. Of course they will be right every now and then the by chance, but turning points are pretty rare so they won't be right often.

Like I said, on the EUR/USD nothing beats a new 80-day high or low as an indicator...

Hey,

I like to look out for support and resistance areas to work off.

All the best

Dane

What's the difference?

Good question.

If it's relevant..

Momentum in the quicker charts (1 min) are a pretty good way to judge the tops and bottoms in the 5 min charts.

I couldn't imagine how you'd do that on the dailies or longer, with fundamentals having a much stronger pull.

Another interesting (but not so reliable) clue is the time of the wave, if the trend your looking at has been going on for the same time as recent swings in your chart.. possible that the trend may stall/reverse.

Picking tops and bottoms is easy to do, but whether the market respects this is another matter. If the market is range bound just look left for a corresponding top/bottom, look for a AB=CD termination point at the corresponding top or bottom and you'll be amazed at how the market can stop and change direction sometimes at the exact pip. Gartleys, butterflys and bat patterns forecast the same thing. Also fib extensions between 1.272 and 1.618 of a previous impulse leg can do the same thing.

The probability in a ranging market is quite good around 60% of the time. However problem is when the markets are trending like now with EUR,GBP,AUD price tops and bottoms are not respected and prices blow straight through them. This is the difficult thing to forecast and you can never know how price will react till after the fact.

Get an ADR indicator.