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Profiting from Technical Analysis and Candlestick Indicators: Powerful Methods for Accurately Timing Trades by Michael C. Thomsett

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8. Support and Resistance—Key Price Points in the Trend

The framework of relative correlation has to be based on well-defined levels of support and resistance. The observed proximity factor reveals that forecasting signals are most reliable when they occur at or close to these borders of the trading range.

Reversal signals are most likely to reverse when they are found in proximity to resistance (bearish reversal) or support (bullish reversal). A reversal signal is reliable only when there is a trend to reverse, and a reversal signal should not be assumed to represent continuation when it appears in the wrong position or proximity. In addition, when the reversal signal appears when price moves through support or resistance with a gap from one ...

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