Weekly Lesson Wednesday📝 

The Depth Continued - Support & Resistance

^_Lesson
Finding Support 😔

Do ever feel hopeless? Down in the dumps? About to get dumped? Not pumping? You are not alone. Sometimes Stocks can be the same way.

Everyone needs support including stocks!

So what is support (and resistance) in stocks and how do we find it?

If you read last week’s bit on the Bid & Ask, this week will be a fucking breeze for you.

When looking into the depth, we can find support and resistance clear as day.

Finding Support 🫂

When we are looking for support, we direct our eyes to the Bid. We look to see how many shares compromise the bid and at what price.

When we see a stack or a load of shares on the bid at a certain price, well that means there is a support level there! Protecting the price from falling below it, due to all the shares that would need to be bought to tank below that order.

So in the photo above, we know if the stock wanted to go below .44, somebody would have to sell 19,000 shares. Not a great example of support but lets pretend that is smthn like 100,000. Then we know that there is massive price support at .44.

How can we use the support?

Few things:

1.) If we see support at a certain price & want to buy the stock, we likely will have to make a bid above the support price if we want to get filled. Because the stock won’t likely go below anytime soon (and if it does it may come crashing harder than you’d like). So the support tells us an adequate price to place an order to get filled.

2.) Big support levels tells us there is bullish sentiment and demand for the stock. So if we decide to get in (probably gonna have to buy above the big bid) we know the stock ain’t gonna tank any time soon (ish). The support now tells us the stock has bullish sentiment.

3.) Reversal point for the stock, you can see the support on the bid as a point of reference to see where the stock may fall too, or a point where it may bounce back.

4.) When the price does fall through support, it is a MASSIVE bear signal (sellers sell through the bids). When support breaks, usually the stock tanks. So watch so support to not break, if support looks like it’s going to give out. Maybe you should run.

5.) Well, if we don’t see support at all, you may be in dangerous waters, you have nothing to protect you, so proceed with more caution.

Now, The resistance.

Legit, just how the support works, the resistance works on the flip side.

If you see a bunch of shares stacked on the Ask, likely the share price will top there and reverse or just get caught up there.

Now on the Ask behalf, see how there are 12,000 shares at .46. Once again let’s pretend that 16,000 is 100,000 or so, so it is more significant. But we know at .46 there is a price resistance, meaning the price will get caught up there, so as the price rises, it will likely stop up at .46 where there is a block of shares for sale, countering the buying.

So .46 is a point of resistance

What does this Resistance mean to us?

Few things:

1.) If we want to exit a stock, we may have to sell at a price under the resistance, the stock may not rise above it, so you will not get filled if your order is above the resistance in no man’s land.

2.) If we see resistance at a certain level, it may tell us where the stock may rise to and then later get stuck at, it can help us gauge reversal prices for entries and exits.

3.) If we see a ton of resistance, it may tell you there is bearish sentiment or the stock is over-bought or overvalued, and shareholders are looking to exit. This is bearish as we generally want our boyz to hold stock, if they all are deciding to sell at once, something is likely up with the valuation or fundamentals.

4.) If the resistance breaks, it may mean the stock is about to fly as there is massive buying and bullish sentiment and no longer anything holding it back, usually when resistance breaks, traders realize this and pile in, driving the price to the next resistance level, making a window for juicy gains. Resistance bursting can be a good entry point.

5.) If there is no resistance, may be a good time to snipe an entry, as a batch of buying could easily influence upward movement.

All done

Well, lads, quite similar to the last one, but we hammered out what the Support and Resistance actually mean and how to weaponize them like an Italian man with any wooden item in the kitchen.

If you read this, thank you, you probably actually care about making a difference in your life or you don’t care about your life at all, no in-betweens. You comfortable ass dudes in the middle probably binging Fortnite and microwave dinners.

Godspeed,

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