Guide to Day Trading Strategies

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Daily Chart - Recent Support and Resistance Levels.
Support and Resistance
Support and resistance levels are formed when a stock repeatedly touches a price and is unable 
to break that price. When this occurs to the downside we call that a support level. When it occurs 
to the upside, we call that a resistance level. Support and resistance levels gain validity the more 
times a stock touches the level without breaking it. If you pull up a daily chart for any stock you 
should be able to draw horizontal lines where you can see critical levels that are being respected 
by traders. Occasionally a level will break brie
Á
y and then prices will quickly reverse. This is called 

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a false breakout. Day traders have to be very cautious of false breakouts because we are often 
taking positions before the breakout has been con
À
rmed. If we wait to take our position until we 
have con
À
rmation, the breakout has already happened and we will have missed a lot of the pro
À
t 
potential. For that reason, learning to anticipate potential breakouts and learning to recognize 
signs of a false breakout will be an important skill for any trader. Additionally, by understanding 
support and resistance levels, we can develop a long or short bias on each of the stocks on our 
morning watch list. This will help determine the potential of the trades and the type of setups 
you will be looking for.
Daily Chart of Gapper - Marking out recent price 
levels of possible support/resistance.

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When I am looking at the stocks each morning that are trading on above average volume, I like 
to look at the daily chart to identify nearby areas of support or resistance. When you look back 
for previous levels of support or resistance, you have to remember that the level is only valid if 
the price has not been broken since the day that high or low was made. That means if a candle 
two months ago had a high of $10.00, and a candle yesterday made a high of $10.10, the high 
of $10.00 is no longer relevant. That high was broken. If a stock is running up, I will look for the 
next obvious resistance point. This will typically take the form of the high or low of a candle. 
I will mark out each of these recent levels, so if I decide to take a day trade, I will be aware of 
potential levels where we might 
À
nd sellers holding the price back. If there is no resistance on a 
chart, that gives me a sense of increased potential, but only if the catalyst is strong.