Another Intra-day Chart To Understand Resistance & Support
Here is the intra-day chart of SWHC. I posted about the key resistance/support for SWHC in an earlier post.
Alot of novice investors/traders still do not understand resistance and support very well. Let us understand that by looking at SWHC intra-day chart. SWHC recently put up a high of $4.80. However there is no way to know the exact top price to short into. What we know however is at what price the stock sees alot of buying and at what price it sees alot of selling. With this knowledge you can find critical trade setups.
From the recent activity we know that $4.50 has been its critical resistance/support level. Read the earlier post to understand it better as to why $4.50 was the key. Today morning SWHC opened at $4.38 and tried to make a run towards the $4.50. If this key resistance was taken out, this stock could have easily spiked to $4.80 levels. So the trade setup should be to short under $4.50, but cover with a stop loss on the break of $4.50, say at $4.55, taking a 6-10 cent loss. Or take a long position on the break of $4.50 with a stop loss below it, say at $4.45.
However, if the $4.50 was not taken out, this stock could drop back. This is exactly what happened. It hit $4.48 and reversed. Once it reversed it never looked back and was under constant selling pressure. It eventually dropped till $4.00 which was its next key support level. This means any smart trader could have made 30-45 cents profit with a possibility of 6-10 cents loss providing a risk:reward ratio of 4x approximately.