Support and resistance areas are fundamental tools in technical analysis, relied upon by many traders to make buying or selling decisions. However, a common observation among many traders, especially beginners, is that the price does not always respect these areas, but rather passes through them without stopping or bouncing. In this article, we review the main reasons why the price ignores support or resistance.
1. The consumption of the area and its weakening over time
The more a support or resistance area is touched, the weaker it becomes gradually. With each bounce, a portion of the existing buy or sell orders in that area is consumed, and with repeated touches, the orders run out and the area becomes unable to stop the price.
Example:
If the price bounces off a level of 1.00 three times, it may not hold on the fourth time.
2. False breakouts
Sometimes, the price temporarily breaks through a support or resistance area, then immediately returns to the same area. This movement is often used by "market makers" to deceive small traders, triggering their stop-loss orders, and then entering in the opposite direction.
3. The inherent weakness of the area
Not all support and resistance levels are of real importance. Some are drawn based on weak candles or uncertain bottoms. Strong support is often found at a clear bottom or in an area that has seen high trading volume.
4. The strength of momentum or news
When the market moves strongly, whether due to economic news or strong momentum in selling or buying, no support or resistance may have a real effect. The driving force of the market overcomes any technical barriers.
5. The market heads towards stronger liquidity areas
The price may ignore support or resistance because it is "looking" for areas with greater liquidity, where there are more buy or sell orders, making them more attractive to market makers.
6. Monitoring on smaller time frames
Support and resistance levels on smaller time frames (like one minute or five minutes) are often weaker and unreliable due to high noise and fast movement. In contrast, the areas in larger time frames (hourly, 4-hour, or daily) are more respected and credible.
Summary
The price's disregard for support or resistance areas does not mean that technical analysis is wrong; rather, it indicates that the market is constantly changing and subject to multiple factors. A deep understanding of these reasons enables you to interact with the market flexibly and make more informed decisions.
