MINOR LOW SUPPORT
Figure 4.3 shows the next test. I looked at valleys (minor lows) and counted the number of times price bottomed near the same price before digging through. I used data starting from January 2006 because I found so many samples that going back further was not necessary.
Figure 4.3 Test configuration: Underlying support at valleys.
How often does a minor low support price? Answer: 33 percent of the time. In other words, one of every three valleys will show support at least once before price drops through.
- Valleys show support 33 percent of the time.
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