Another interesting question (for me anyway :) )....
Q....How strong are these R&S lines,...some just don't work???
A....When I have doubts about R&S especially in 2008 crash times when a resistance line seemed like it never existed...I compared these R&S lines with other R&S systems. One of the best is the Ichimoku Kinko Hyo Charting System. This system is a better measure of Resistance and Support as it is multidimensional... not just a simple drawn 2 D line on a chart that most of us use here on ST.
The NZX50 chart below may seem complex but when looking at it for the first time remember to keep it simple by remembering 2 things that are the topic of this Sharetrader (ST) thread
1... looking for powerful R&S lines using Ichi as a reference
2... Looking for a future change in a trend (e.g when could a possible correction occur).
OK ...for our two goals and keeping it ultra-simple we will ignore several bits of information on the chart including the green and the single red line...no worries.
Also remember the inside of the kumo (cloud) is resistance and/or support
Looking for powerful R&S lines..the most obvious one is the 2750 in July 2009 ..see how the index bounces up off the bottom of the Kumo (shaded green). when we see the bounce + there was a similar action at this 2750 at the beginning of 2009 we know that R&S 2750 line is huge.
Another R&S level which is of interest is the 3378 line which is not far away now....it was powerful back in Aug/Sept 2008. Is it powerful now? we will know when it happens. 3600 could be another to watch in the future. Also note that new R&S levels can be formed.
When will there be a possible trend change? Notice how the Kumo extends past today into November 2009. The Kumo expands and contracts with volatility of the index. The thicker the kumo the greater the Resistance ad Support it provides..when the Kumo becomes very thin to the point that it may twist ( e.g red to green...green to red) at this point the Kumo (or lack of) offers the least support and could result in a trend change....downwards in this case.
See from the chart when the index is above the kumo it falls when the Kumo is thin
At this moment notice how the index is not far above the Kumo..also note that within a month that kumo will be not be as thick and with the index a lot nearer the kumo this time increases the chance that any selling pressure maybe enough to cause a downtrend change pulling the index down back into the Kumo to test its weak thin bottom support...If the index falls below the Kumo ..the kumo becomes a resistance object.
Using Ichimoku in conjunction with Phaedrus chart using R&S lines the 2 different principles confirm with each other that this is a time that an investor should be cautious and alert.
http://i458.photobucket.com/albums/q...0208102009.png