Intraday Support Level SWHC 04/14/2009

Using an intraday support level is one method that can be used to determine entry points for trading, especially Day Trading and Scalping. This example uses SWHC 04/14/2009 as I have written several pages on SWHC in the past.

The latest issue of my free Market Trader Ezine that was released this past weekend, had some information regarding a page I recently updated SWHC Analysis 04/07/2009 and mentioned "It can go either way from here. Using the recent day's highs and lows may prove to be good support and resistance levels to use for entry points long or short.".

Using my particular trading style, I try and look for reversals off support and resistance levels to enter a trade. In the case of SWHC, let's take a look at what the stock did during the first hour of regular trading today:

Intraday Support Level SWHC-1

The green line towards the top of the chart represents the previous days closing price level. Since the stock opened and moved lower, this line is now an intraday resistance level since it is above the current stock price.

Between 9:30 and 9:46 a.m. sellers out numbered buyers and drove the price lower. As the price moved lower, inexperienced traders may have panicked and continued selling. But who was buying near the bottom around $6.10 and why?

An experienced trader often will have multiple charts open, or at least a 2 day chart instead of just the current intraday chart. This will allow for them to look for previous support and resistance levels. Take a look at the 5 day chart below:

Intraday Support Level SWHC

You can see that I added a red line at the price level in which the price of SWHC bounced off of 3 separate times the prior day. This indicates buyers are willing to step in at this price level (at least currently) which is a short term support level.

You will also see that I added a green line towards the top, which indicates a point where people were willing to sell several times over the last few days. This is the short term upper resistance level. You may also notice that yesterdays closing price level near $6.30 was also a midline support and resistance level over the last few days as well.

So, looking at both of these charts, you can see that buyers stepped in today near the $6.10 price level which was our intraday support level we should have been looking for based on the previous few days. Now this, and other techniques, do not work 100% of the time, but I have seen them work many, many times over and over again.

When entering a trade at or near a support or resistance level expecting a reversal, make sure you use a stop loss to allow for being wrong in your expectations. Any considerable move through one of these levels may be the sign of a "Breakout".

Once you practice and start to recognize these levels yourself, you can see how accurate they really are. Today's bounce off the initial support level would have produced a nice 2-3% profit within 15 minutes time.

You can also see that as the price of SWHC bounced off the intraday support level, it met up with resistance at the previous days closing price and pulled back some. This is a natural resistance level to be aware of.

Whenever I can, I will include chart illustrations, examples and things I feel may be useful to look for such as support and resistance levels to watch to subscribers of my free Market Trader Ezine. Subscribers who read my latest issue would have had an opportunity to make a quick 2-3% this morning and take the rest of the day off.




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