Last Wednesday I was having a look at a possible "resistance becomes support" scenario in the February Lean Hogs.In fact hogs have moved nicely off that level to become a textbook example of this nuance of price action. The fib retracement traders will also be claiming this one as well as it is in the 50% retracement region that most look for. I'm hoping at this stage that price action holds up long enough to for this to be a textbook example... and anyone long some calls will appreciate that too. :)
Not withstanding that resistance often does often become support, I never have had a satisfactory answer as to why this happens. It's good enough for me that it just works as far as trading goes; but the vacant stare on my face is not a good look when someone asks me this very question.
Anyone with an answer? I'd be much obliged.
3 comments:
People shorting at resistance, and who are thus in the red as the commodity/stock breaks resistance, become buyers at their break-even point as it returns to that level. Resistance becomes support.
Sounds like a dangerous game, but makes sense. I knew there would be a logical explanation.
Thanks Brendon
That will be interesting!
I shall look forward to it. :)
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