Old Resistance New Support: One of my Favorite Technical Chart Patterns

Let me show you a couple of charts to visually define a chart pattern that when I see it and trade it helps me make nice profits.

There is no denying the markets have been on a prolonged upward motion since the October lows of 2023.

Add to that the recent continuing upward move higher from Donald Trump becoming the President-elect (again) this November called the ‘Trump Bump,’ and you wonder when the top will actually happen.

Some are saying this past November 11, 2024, could have been, or has become a top in the marketplace. It may have been, but does this mean the markets are going to continue a further decline? 

It is possible but I don’t see it as we are at the cusp of the seasonally bullish end of year, Holiday rally.

Old Resistance / New Support 

What has happened in the past week is a technical pattern of price action has formed that when you see it and are taught to look for it and see how profits can be made from it, it will become second nature for you to start seeing the pattern when you do your charting from here on out. 

The above chart (Figure 1) is a chart of the SPY. The term ‘Resistance’ when it comes to technical analysis is used to define the price of the security being charted trades at and ‘resists’ going any higher in price. Or resists going higher for a period of time.

When the security’s price goes higher than that resistance price it is called a break out.

There are times when the stock doesn’t ramp higher right away after the breakout. Instead, it takes a day or two or three (or more) to retrace back to the break out / resistance price.

It is at that time, at that old resistance price. people who missed out on the breakout have a chance to get in on the stock if they believe it can and will go higher.

That buying at that test of the breakout / resistance price spurs the security higher and the pattern is formed. The pattern is Old Resistance becomes New Support.

One quick price target for the security could be the top of the move that constituted the breakout.

One can then place a trailing stop to participate in more profits or be happy with that quick little pop in price.

Another Example of Old Resistance becomes New Support?

Here is a chart on FactSet Research Systems Inc. (NYSE: FDS) 

You can see $474 is the price where FDS bumps up against as a ceiling or a resistance point: It tested it twice as a resistance and feel back in price. The third time was the charm for the bulls as FDS broke out above that price and ran up near the price of $488.

It settled back from nearly $488 to what price? That old resistance price of $474 where it then became a new support and has bounced a couple days from that price.

If I were to assess a very short-term price target I would do so at the previous high of the breakout at the $487 price (near $488).

To your best success,

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