Spotting support & resistance will pay you well!

Chart reading and investing go hand and hand like School & Text Books. You wouldn’t study for a test without reading the text book and reviewing your notes? The same is true in the market, if you are trading without looking at charts you are taking a test blind and you will ultimately fail.

Below I will show you two charts of the same stock. The first chart will be just of the price action to see if you can spot the pattern. In the second Chart I will show you what a trained eye can pick out and how to turn practice into profits.

Let’s look at the chart of Conoco Phillips (COP)

Conoco Phillips (COP) channeling stock

Alright, doesn’t look like much to the naked eye right? OK, now let’s look at it from a technical analysis.

Conoco Phillips (COP) channeling stock

the blue box is called the trading box also known as the “channel” because the stock stays within a defined range.

the top line of the box is known as “resistance” a term you should get familiar with if you are serious about trading. Resistance is the area where traders feel the stock is not worth the price (overvalued) and begin to sell thus making the stock hard to break through to new highs and ultimately sending it lower.

The bottom line of the box is known as “support” another term you should get familiar with if you are going to last in this industry. Support is the area where traders feel the stock is a great buy (undervalued) and begin to come in and buy (support) the stock thus putting the brakes on the downward momentum and ultimately sending the stock back up.

The trading range is the range in which the stock stays thus letting you how much you stand to make per one revolution of this stock hitting support and resistance. For example on the green buys which is roughly when the stock is trading around $68, it then roughly six days later trades around $74 dollars. That is a $6 “Trading Range” Doesn’t sound like a lot of money but if you owned 1,000 shares of this company or 10 options contract’s you would stand to make $6,000 in 6 days. Notice the stock has performed this pattern on 3 occasion which means if your timing was correct in a perfect world and you caught all 3 revolutions you would stand to profit $18,000 in one month. Now does $6 still not sound like a lot of money?

Most people say “a picture is worth a thousand words” well in the investment community we say “a picture is worth a thousand dollars.”


About A-B Financial L.L.C.

Hello, my name is Jason Brown, your host for all these wonderful stock and options blogs. For those of you who don't know me I thought I would give a little background on myself. I started trading back in 2003 when I was introduced to the market by a family member. I always heard about the stock market and how people became wealthy from it but I never knew how or if I could do it. I started my trading account with $500 dollars. I thought "if I could just make $50 I would be set", that was big bucks to me back in 2003, especially money I did not have to work for. Well I made that $50 and soon realized the potential of the market and what it could do for me, for my family, for my lifestyle. I shortly after took a $10,000 student loan that was suppose to pay for tuition at Wayne State University and put it to work in the market and grew it to a six figure income. Since that time I have made and sometimes lost more than most people make in a year with a husband and wife both bringing in a dual income. I started this blog to share with you my years of trading experience, success and mistakes in today's current market environment. I do not give advice just my analysis and perspective on the market and how to invest using options. All I ask is a few simple things. If you like what you read please leave a comment or click the like button, also if these analysis makes sense to you and you know someone who could benefit, please share it with them as my aim is to reach as many traders as possible. Thank you for taking time to read and follow my blogs, I am honored. J.Brown (stocks and options analyst
This entry was posted in Stock Analysis and tagged , , , , , . Bookmark the permalink.

Share your thoughts & Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s