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Resistances, for the purpose and application
of the S90/Crossover within a bear trading range, are indicated
by a grouping of five (or more) candlestick bodies with the
center wick(s) being higher than the tops of the two candle
bodies or wicks that have previously formed to the left and the
two that subsequently form to the right.
As the market moves down, resistances are developed, and they
should be marked, in case the market returns to that level. The
circled top and bottom represent the trading range in question.
Notice that the support areas of the trading range are not
considered to have value within the range; therefore, no lines
are drawn for supports. Supports will be illustrated later in
this chapter.
As the market pierces the horizontal line B, a stall often
happens in the market, and
one of four features will be observed:
1. If the market arrives to the level but does not breach the
level with an open and close
of a candle body, it may go sideways until it either breaches
the level and continues
in the same direction or reverses and returns later if the level
was not breached.
2. The market may strike the level and a reversal may occur,
depending on whether the
level was also duplicated as a Fibonacci level. As long as the
level is not breached
with an open and close of a candle body, then the odds are
increased that the market
will eventually return to the level. If the level becomes a
future Fibonacci level within
a future trading range, then the odds of the target level being
reached are increased
tremendously.
In summary, the farther away from the level that the market
moves, the
greater profits may be made when the market begins its move back
toward the
S90/Crossover level, which has been duplicated with a new
trading range Fibonacci level.
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3. The market could breach the level with an open and a close as
it passes by the level
and then retreats back to the opposite side for a new open and
close. This means
that the market has opened and closed on each side of the level
and the level can
never be trusted again, unless it forms a new support or
resistance in the future in
the same area, which increases its value at that time. This type of
market action on each side of the level is considered an illegal
S90/Crossover and
cannot be trusted unless a future level is established in the
same area with a new
trading range. Then it becomes a historical level with increased
odds of becoming
a market attraction for a future target or a bounce entry as a
reversal point in the
market.
4. If the market not only breaches the level, but immediately
continues in the direction of the former run, then this is a
good sign, and as long as
the level is not defined as illegal, the odds have increased
that the market will eventually
return to the crossover as a target and a possible new bounce
entry, provided
other confirmations are present to justify the entry. Such
bounce confirmations may
be a PCI (percentage change indicator), ROI, or even a volume
indicator. This new
entry would be considered a reversal or bounce entry.
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