Monday, November 20, 2006

Lean Hogs

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.


Brendan said...

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.

Avalonian said...

Sounds like a dangerous game, but makes sense. I knew there would be a logical explanation.

Thanks Brendon

Howard Lindzon said...

You can never have enough lean hogs. next weeks wallstrip has a little hoggy surprise for pig lovers. rachelmax

Avalonian said...

That will be interesting!

I shall look forward to it. :)

sexy said...