Support and resistance levels breakout is one of the best and strongest trading strategies in Forex and stock trading. As a relatively valid support breakout is formed on USD/CHF monthly, weekly and daily time frames, we decided to cover the support level breakout strategy in a separate video and article. Please make sure to watch the video HERE, and please like the video to help other traders see it too. This may prevent them from losing more money on the Forex and stock markets. Also, please don’t forget to subscribe to our YouTube Channel. This enables you to receive our market analysis videos on time enough, so that you will be able to take and manage your positions before the markets price movements.
What Is Support Level Breakout Trading Strategy?
It is based on support levels breakouts. Support levels are horizontal levels that prevent the price from going down. They are different from support trend lines. Support trend lines can be seen below uptrends and on bull markets. They are not horizontal. They are slant and have an angle the goes from the left side of the price chart which is lower to the right side of the price chart which is higher. They are below uptrends. But support levels are 100% horizontal. They are much easier to trade, compared to support trend lines. Support trend lines need a lot more experience and knowledge to plot and validate, and they are more tricky, and have higher risks to trade. But support levels are easier to locate, validate and trade, and so it has a lower risk to trade support levels.
When a support level becomes broken, which means the price closes below it, that is the time to sell short or take a short position. However, in most cases, we will have to wait for the price to go up and retest the broken support level, before we take a short position. This helps us to find out whether the support level is valid or not, and whether it is going to work as a resistance level after the breakout.
When a support level becomes broken, it will work as a resistance level, if it is valid and the market respect to it. If the price goes up and closes above the support level after it is broken, it means the support level is invalid, we can’t trust it, and so we can’t take a short position after its breakout.
We use candlesticks in this case. If a candlestick closes below a support level, we know the support level as broken. If any of the next candlesticks goes up, touches and retests the support level, but closes below the level again, then we say that the support level is valid, and is now working as a resistance level. But, if any of the candlesticks closes above the support level during the retesting, then we have to forget about the support level and its breakout.
Now, let’s take a look at USD/CHF monthly, weekly and daily time frames, and see how the support level breakout it has formed looks, and how we can can take it as a short trade setup.
Please make sure to watch this video, because it describes exactly the below forming trade setup that is based on support level breakout on USD/CHF monthly, weekly and daily time frames. Please make sure to like the video as well. Thank you 🙂
Below, is USD/CHF monthly price chart. As you can see, there is a support level at 0.91867 that seems broken by July 2020 monthly candlestick, because this candlestick has closed below the 0.91867 support level:
As we were not sure about the validity of this support level and its breakout, we decided to wait for the next candlestick(s) to retest the broken support level to see whether the broken level will work as a resistance level or not. On the weekly time frame, although the current forming weekly candlestick still has several days to mature and close, is reacting to the broken support level as a resistance level so far. We must wait for this candlestick to close first. Then we can analyze it, if we want to take this support breakout based on the weekly time frame. If it closes below the support level, then it means the market knows the broken support level as a resistance level now, and so we will have a short trade setup based on the weekly time frame:
On the daily time frame, it seems we will have a short trade setup after the currently forming daily candlestick close, because the 2020.08.03 daily candlestick retested the broken support level strongly, and then closed above it, which means the broken support level is working as a resistance level on the daily chart now. If the currently forming daily candlestick (2020.08.04), as of writing this article, closes with a bearish body, below the support level, and so it forms a candlestick sell signal with the previous candlestick (2020.08.03), then we will have a short trade setup formed below the broken support level and by candlesticks, while we know that the broken support level is working as a resistance level:
So, let’s wait for the currently forming daily candlestick to close. We will analyze the above charts again once the currently forming daily candlestick closes. If you like to receive the video on time, please subscribe to our YouTube Channel, and turn on the bell notification as well, not to miss the trade setups.
Do the Markets Always Retest the Broken Support Levels?
No. Sometimes they don’t retest. Sometimes the price goes down strongly after support breakout, without going up to retested the broken support level. This can cause us to miss a good entry level and short trade setup. It becomes too late to take a short position when the price has already moved down a lot. But we never know. If we wait for the markets to retest, we will lower our risks dramatically. Taking care of our capital is what we must do as traders. We shouldn’t think about making profit. Losing no money is the first thing we must care about. So, we must wait for the markets to confirm everything, before we take any positions. If we don’t lose money, and we lower our risks and losses as much as possible, then we will make profit as well.
Click Here to watch the video of this part that starts from 06:36.
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Click Here to watch the video of this part that starts from 11:11.
There are some interesting technical analysis lesson in our NZG/JPY analysis here in this video. Please make sure to watch it, because maybe we will have some good trade setups forming.
Support Level Breakout is a good, safe and easy to understand and follow trading strategy. Make sure to follow us here and also on our YouTube Channel, because we will keep on checking the above USD/CHF forming trade setup, as well as the other markets, and we will report all the formed and forming trade setups, based on this trading strategy, resistance level breakout, and also so many other technical and strong trading systems.