On October 20, 2011 I showed How Crucial Support Levels can be? and today I will explain How Crucial Resistance Levels Can be?
Nov 9 2011, in my article on Trading Investment Portfolio I explained how to find the resistance level with example of Nestle India. I mentioned 4500 was very crucial for Nestle India and used the same level to tap some gains as well on that day.
Now observe the chart of Nestle India on November 14th 2011, the level of 4500 proves crucial yet once again.
So my question to all my reader is – Do you agree that Support and Resistance level works in market? Share your views in comments below.
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{ 6 comments… read them below or add one }
Hello sir,You expalained very well but i am on just learning level of stock market so can please explain me resistance & support level.and what is stop loss and target level.
Sneha, have you seen http://shabbir.in/calculate-support-resistance/
Hi Shabbir, for me they constitute obviously a psychological level. I think in most cases the resistance is caused by stop-losses in the case of people wanting to break even. For others it constitutes a level at which they will be content to sell for gains, or just a long term goal, which if reached they earlier planned on selling at; mainly due to low faith of it breaking such key levels.
It seems that a lot of people use the same key psychological numbers i.e. nice and bold round numbers, like 4500 in your example. Thus my question is why?!?
Thanks
To Answer your why probably the fundamentals of the company becomes too stretched in the current scenario or it may be that some large investors are getting out of the stock at such levels.
Hello SirG, Just one question, totally out of this subject. Have you heard or tracked a stock called “Orissa Minerals Development Company”? The stock price is a little over 40k per stock. Yes, 42000Rs for a single stock. Do you think it’s worth investment in such stocks? Thanks.
Hi Mansoor, yes I have read a lot about that stock but I think it is too costly fundamentally for an investment and technicals of the stock is also not that attractive. So I would not invest in that stock. This is all I can say.