PFF Panel 3
Seedly PFF 2019
Asked on 02 Mar 2019
Just want to use the simple idea of "support" and "resistance" as well as a simple illustration to answer your question!
Lets look at the share price of Exelixis Inc. (EXEL), listed on the NASDAQ as an example:
In layman term, think of a stock price movement like the motion of breathing. One has to inhale, take a deep breath; exhale, removing the air in your system before inhaling again. In a sense, that can be said for stock price movement as well! They have to increase gradually, decrease slightly, and increasing again - in short, the long term stock price rises as the price makes higher highs, and higher lows - as seen in the diagram above.
One easy way (not exclusive or by no means is this completely true) is to draw a "trendline", to roughly determine where the next lowest point, or highest point will be at. If you are bullish on this stock, your goal is to enter/buy this stock when it is at its 'new low' ie: I should buy EXEL on 10th Nov and 24th Dec
This is just a general guide but i hope this helps in helping you get a rough sense of how you know when is a high/low of the company share price.
There is no foolproof way to determine if the share price is at the top or the bottom of the rising trend.
However, we can use the past performance of the share in an attempt to find the resistance or the support level. This is usually done with the help of a robot of an excel to calculate such points.
Having mentioned that, the actual top or bottom will depend on the market sentiment as well. Hence, any calculation may or may not be correct.
Ideally, you may wish to consider studying the share itself and whether the business is worth investing into for the long run.
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