Chapter
3 Definitions,
Structures,
&
Examples
Profiting with Chart Patterns
3-4
nirvanasystems.com
Support & Resistance Structures
Here is our expanded structure diagram for Support and Resistance. The reason we
have two Eighths tools is that you can have a bounce or a break.
The more powerful
of the two is going to be a break. Support breaks do create panic, and you really want
to watch for those. But, equally tradeable is a support bounce. Again, you are looking
for the third bounce. Typically you will see where the chart bounced off a price level
and now it is coming down for the third time. It is that third bounce that is typically
the most tradeable. But, you can trade the second bounce as well.
Figure 3-3.
Support &
Resistance Structure Diagram
Looking at our structure, you can see that the target is drawn at the 50% level on both
the upside and the downside, which gives us our 3:1 Reward:Risk from the ideal entry
point.
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