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“…The S&P 500 twice closed above 1,370, a closely watched technical resistance level,” says an article published yesterday on CNBC.com.
Wait, what the heck does that mean?
Resistance is one of those words that gets thrown around a lot by market professionals without much thought about whether or not most people really know what it means. I’ll admit that I’m guilty of that too. But today, I want to take a minute to explain exactly what resistance means in real terms — and show you a real-world resistance trade I just made with my premium readers to take home gains of 12.7% in less than a month.
Shares shoved their way above $5.05, and we pulled the trigger on the trade on February 6. By March 1, shares had reached our price objective and we took gains of 12.7%. Along the way, this stock demonstrated an important characteristic of resistance levels: the fact that they become support levels — or price floors — once they’ve been exceeded.
All told, the completed trade looked like this:
Now that stocks are back in sustained rally mode, it’s becoming easier to spot tradable resistance levels in the market. That means that you can put this simple technique into practice to find profitable trades of your own — it’s as simple as bringing up a candlestick chart at a site like StockCharts.com, and looking for resistance levels in a handful of stocks.
The majority of options you buy expire worthless. Now think about what that means for the person who took the other side of the trade.
Ignore what's happening in Washington for the time being. Here's what's propelling the bull market at these late stages...
Three of our positions expired last week, and we will have an opportunity to generate even more income from one of them.