Rationale
Technical analysis has many objective rules and techniques, but it all still depends on the subjective interpretations of the analyst. For example, after a market establishes a support level and trades one or two ticks below it, is that considered to be a break of support? What if it traded below support for only a brief time and then bounced right back up? The analyst must use other indicators and rely upon experience to determine if this was a real signal or just market “noise.”
Strict interpretation of technical rules can cause the technician to set seemingly accurate support and resistance levels that are weak and not related to true market conditions. Figure 20.1 shows 350 days of LME Aluminum. At the 1,740 level, a former support ...
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