Trading Opportunity

Resistance broken and price near chart maximum

Theory: Earlier tops in the price are important for defining resistance levels. Many will think that since the price dropped at this level earlier, it might do this again. A high accumulated volume at a certain price level is also important for defining resistance. It is probable that many will want to sell again at this level again - either to repeat a good sale from earlier, or to sell without a loss. At resistance levels, there will therefor be more sellers. When the price breaks up through the resistance, this means that sellers at this level have sold their stocks. There still is buying interest, and the price rises further since there now are too few sellers. If a resistance is broken near the top in a chart, this means there is very little resistance above the current price. Maybe it also means the price has reached an all-time high, and that there is no resistance at all. The price is therefor not hindered by sellers who want to get out without a loss, and the stock can quickly rise further.

Score: The most important factor in the calculation of the score is the strength of the resistance that has been broken, the distance from the price down to this level, and the distance from the price up to the maximum price in the chart. In addition trend, possible formations and volume development are taken into account.

Buying price: Is set one "normal movement" above the support level. A "normal movement" is defined as the average price movement during a period equal to about one percent of the length of the chart.

Price target: Is set to the estimated theoretic maximum price, given that the price develops as a slightly coloured random walk for 20% of the length of the chart. Normally, this will be 15-30 procent of the height of the chart.

Stop loss: Is set to approximately one "normal movement" below the support level.

Time horizon: Is set from 14 to 20% of the length of the chart.