IT’S A MATTER OF RESPECT
Observing how much respect a particular issue, be it a stock or an index, is giving to technical levels can tell you a lot about the intentions of the stock going forward. It doesn't matter the level of importance that YOU assign a technical indicator. What matters is how important THE MARKET thinks that technical indicator is on its own personal scale.
I see so many traders get caught up in their favorite indicator. The market could be ignoring it for weeks, but they cling onto it like a 5 year old to his favorite blanket. It's security for them, just as a blanket is to a 5 year old. That favorite indicator keeps your ego intact and your hopes alive. Of course you are going to have faith in it despite the market giving you solid indications that your security blanket smells of sour milk and a soggy bean burrito.
As you may have noticed over the past few months, I keep my charts extremely simply and clean. I only use trendlines, support/resistance areas, price patterns and volume. I use no moving averages, oscillators, or anything else that involves squiggly lines that are derivatives of price action.
All those colorful, squiggly lines that you love are made by the price of the stock and the volume that comes with it. If you understand price and volume well enough, you can eliminate those squiggly lines for good. I promise you that real men, like the guy from the Dos Equis commercial, Burt Reynolds and Hulk Hogan all use clean charts, without all the fancy stuff that ends up confusing traders more than anything else.
Let's take a look at a few examples from today of the market showing respect or a lack of to an area of technical importance:
QQQ
SOX (semiconductors)
PSTR
