Blurred Lines and Why Support and Resistance is open to Interpretation

Once in a while it would be nice to get a textbook-like entry or exit, where we can easily and clearly identify support and resistant levels. However, I seem to find the ones that are complicated … you know the ones where we have to look at the chart in a different angle.  Kind of like looking at art, you have to take on a certain interpretation.  Take for example here, this is one which shows a support level, but you need to have a little bit of a creative interpretation.  Support levels may be a little bit blurred because price may not actually bounce off it, but rather, may just fluctuate around the zone. But that doesn’t mean you always have to cut these types of stocks from your watch list. In fact, in most cases, nothing comes so cleanly, and you have to weight the pieces all together and see if it’s worthwhile taking the risk.

In this chart, you can see an awesome-looking move as the price went from 2003 all the way to 2005, 2006, almost clearly going up and up and up. But then it started to stall in early 2006, and you can see a support level around 27, 27.5 point. However, what was going on in June and July of 2006 is that price hit the support level, went sideways for a while and then bounced up.

Now, this isn’t exactly the most textbook type of support because you can see how price fell below the level then hovered around, digested, and then bounced up.  Many people would have cut this chart, but other people may actually take this as a good, solid support level.  If you have many choices in your watchlist, it may be worthwhile to cut it all together because this is a little more advanced of a setup. 

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