Anthony Speciale Stock Market Analyst

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This is Why We Like to See Resistance Turn Into Support

Today, we’re jumping right into the chart because this is when you’ll confirm your analysis was done properly.

Today, we’re jumping right into the chart because this is when you’ll confirm your analysis was done properly.

Seeing what was previously resistance turn into support or previous support turn into resistance is typically a good sign your theory is coming to fruition.

Daily Chart of BTCUSD — Source: TradingView

Pictured above is a daily chart of BTCUSD. We touched on the breakout that occurred about a week back from this image.

I had indicated that a breakout with conviction would likely yield the descending channel top at approximately $47,000.

While that’s all fine and well and I believe that this is still going to do what I expect it to do, the confirmation of the black channel I’ve drawn has added credibility to my initial analysis.

A Close with Conviction

You can see price reacted to that channel top for three days in a row, and price touched it and failed not once but three times (indicated by downward arrows).

Finally, the price closed above it on the fourth day, and it closed above it with what I call conviction (indicated by upward arrows).

And then what happened? For the preceding three days at the time of this image, price had now tested that same area it had previously failed from and is now finding support there.

Does this mean that the price can’t roll over and fail? Absolutely not. It most certainly can. However, this in my humble opinion is a great confirmation of the initial analysis.

As long as price continues to settle above that channel top, we’ll be in line to head towards that descending teal channel structure we had originally anticipated.

Being able to identify when the transition from resistance becomes support or when support becomes resistance is vital to trade management.

Time to Limit Risk

This is when and where I’d be looking to limit some risk in the position simply because the technicals have stacked up on my side.

There’s a higher chance of this trading following through as planned than it rolling over and failing when this scenario occurs.

As we continue to analyze charts, you’ll commonly see me referring to what I believe confirms our analysis.

We won’t get it right every time, but as the chart and price action evolve, we’ll better understand when it works and when it doesn’t work.

You’ll find common threads in the trades that transpire profitably as well as common threads in the trades that end up not doing what we anticipated them to.

Rules to Live By

I am enough of an artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.
― Albert Einstein

Until next time, I wish you a beautiful and blessed day!

Yours In Trading Success,

Anthony Speciale Jr.

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