The Importance of Highs and Lows in Trading

What this is going to do is it is going to show me very, very quickly where these areas are and how the market relates to that. So right there, what I have done; let me draw this in. What I have done is I have contained this area with two lines. Those two lines are right here. If you are just listening on the phone, this may not be making a whole lot of sense to you but if you are watching the video, it will.

Anyway, now you can see there’s the zone I was talking about. I can see that the market has some reactions in there. Let me erase all of this. Now let’s go ahead and draw in the other area down here, here and here. Now you can see what I did. I keyed in on a couple of points, here and here. I keyed on a couple points here and here. Now I want you to observe what happens to the market. Look at this. Time after time, the market finds support. It finds resistance. It bangs it head. The market participants make decision around these lines so we have to honor that. We have to know that in the future they’re going to do the same things.

I am getting so excited about this stuff because I love it so much. So let’s go ahead and zoom back in. All of the lines are still on the chart. Now let’s look at this in more detail.

These are lines I drew months and months ago back here on the chart. Look at this; weeks on end. Time after time, the market is making a decision as it reaches this consolidation here. It’s even information at the market just blows through it. It blows through again; it blows through again. It’s not that the line failed. It’s not that the theory failed. That’s very, very important information. Let’s zoom in more.

We can see that the market is entering into a place where it can make some decisions. Hopefully you have seen that. I will zoom way in now. Now we can see; we are looking at the last couple of weeks, going back into March. We have got to start really zooming in on our game plan. The reason why I don’t want a lot of information on my screen now is I want to be able to have some distant targets. I want to be able to even as a day trader, look at the marketplace and know that if the market makes a breakout, that I have a potential for a big, big move to the downside. So you can see this line here was left on my chart from literally a year and a half ago.

What does that mean? It means that if the market can get down, it’s going to get down to this level here.

Okay, so if the market is going to break and it is going to make a move, I want to know where my first target is. You can see it is just above 9505. Remember, this is a weekly timeframe. Now as I zoom in; remember I started this whole thing talking about the weekly high and the weekly low. Here is a weekly high. Here is a weekly low. One thing you can notice is that the last one, two full weeks were not able to break through either the high or the low. The reason why that is important is if for some reason big money is not willing to sell lower than this price, but they are not willing to buy above this price either.