We posted this chart on Twitter last night showing that Stellar was nearing a “retest” of crash lows – – what’s the big deal about “retests” and how can it make or save you money?
If you follow trading gurus in stocks, currency or more recently cryptocurrency, you’ll often read statements like “It’s gonna test the lows” or “wait for the retest”.
Here’s a quick example to show you some basics of what they’re talking about:
Just like any other test, price can pass = “hold at support” and turn higher which Stellar has on all 3 test/retests shown above. Or price can fail = “breakdown” through support —
AFTER A BREAKDOWN (OR BREAKOUT) – “WAIT FOR THE RETEST”
Let’s be crystal clear: There’s no guarantee of a retest. Price can go straight down through key support and stay there–for a long time. However, based on many factors there are times where a retest of key support is a moderate to high probability — and waiting for that retest can help you
- define new trades with more patience =wait to enter (make or save you money)
- exit winning trades at higher prices (make you money) or
- exit losing trades at higher prices (save you money)
Think of the above chart telling this story: Traders invested a lot of money at key support levels — that’s how they held up for 3 retests — some will bail if they see that support break down (often see a spike break down for this reason as stops are hit). BUT some traders are more committed, and others like the idea of buying in cheaper than most got it so they will tend to push price back up to “retest” that key support level.
POP QUIZ — Based on the charts above, would you expect Stellar to have a retest of key support (now resistance) if it breaks down on the 4th (or 5th) retest? Why?
You can watch and see what happens or you can subscribe to cryptopatterns newsletter and learn how to determine the probabilities for breakouts, breakdowns, key support and resistance levels and a whole lot more.
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