Getting Started with Technical Analysis | Lesson 4

Hello everyone and welcome to Schwab Coaching. My name is Cameron May. I'm a Senior Manager Education Coach here at Schwab, and this is Getting Started with Technical Analysis. This is Lesson 4 in our intended series of 8 lessons for those that are just getting acquainted with this discipline known as chart analysis. And you know we've all heard the phrase 'buy low and sell high', but what might it be that a trader looked for on a chart to help them identify price floors and price ceilings? Well, today that is the focus of the discussion. We're going to be talking about identifying price levels known as support and levels known as resistance. Support and resistance. Floors and ceilings. It should be a great discussion. A number of different ways it can be accomplished.

So we're going to be going through examples of each of those. But before we can get to any of that, let me first of all say hello out there on YouTube. Great to see our attendees in the live stream. Hello there Will and Speak Truth, Bob, SJS, BJ, Michael, Chris B, Ricebird, Janet, Jeff, everybody else. Thanks for joining us. Thanks for joining us week after week. As I say every time, and I mean it sincerely, we really do appreciate your attendance and your contributions to these discussions. If you're here for the very first time, I want to welcome you as well. And if you're watching on the YouTube archive after the fact, enjoy the presentation, but be aware that you're invited to join us in a live discussion.

This is a Tuesday webcast series. It kicks off promptly at Eastern time. So we really would love to have you here in the live stream. Now I also want to let you know that my very good friend James Boyd is going to be hanging out in the chats with you. James is just going to be answering any questions as long as they're on topic. If I can't get to those just during the flow of the presentation, James is there to pick up the slack for me. So thanks for being there, James. And James and I would also like to issue an invitation to you. If you're not following us on the platform known as X, please do. That's the best place to connect with your favorite presenters in between the live stream.

So you can find James there at JamesBoydCS. You can find me there at CameronMayCS. But all right. With that, let's dive in. And of course, the very first thing that we need to do is pause to consider the risks associated with trading. This is important information, so do bear it in mind. The information here is for general informational purposes only and should not be considered an individualized recommendation or endorsement of any particular security, chart pattern, or investment strategy. While this webcast discusses technical analysis, other approaches, including fundamental analysis, may assert very different views. Schwab does not recommend the use of technical analysis as a sole means of investment research. Any investment decision you make in your self-directed account is solely your responsibility. All right.

So here's where we've been in this series. We're on right now lesson four. But we started with just an introduction to the discipline known as technical analysis. Then we reviewed basic charting. Finally, well, next up, lesson three was trend identification. That takes us to support and resistance, otherwise known as price floors and price ceilings. So here's how we're going to talk about support and resistance. First of all, I want to provide just a basic introduction to the concepts of support and resistance. Then we're going to discuss different ways to identify support and resistance. We're going to go back to last week's discussion of trend lines and how they might be used to identify price floors and price ceilings. And we're going to bring all of this together using examples on current charts.

All right. So let's get right to the very first concept, support. So this is that. So this is that trader who's heard the phrase, 'hey, buy low.' Well, where is low? Where is a price floor? Well, a support is identified, as we've discussed in the past. Support is generated through supply and demand. This is an area where demand increases. And there are more investors who are willing to buy than to sell. So you can imagine that pendulum or that teeter-totter between buyers and sellers. If there's a lot of demand, a lot of buyers, it can tend to push prices up. And if they're low, if there's a comparative paucity or lack of sellers, that price can push up from those price ceiling or price floors.

So when we see that on a chart, it just represents itself as a reversal of price, maybe from downward motion up into upward momentum. This works like a floor, and it supports the price from going lower. So we use this phrase support. We've called it a price floor. But it's almost as though it's a price floor. It's a price floor. It's a price floor. It's a price floor. We're an invisible force preventing price from falling further. What is it really? Well, it just basically means that there's an imbalance between buyers and sellers. There's more buyers than sellers, more demand than supply, and that can cause price to go up. Now, an important note for technicians is that support is a general area, not a specific price.

I know in our minds, it's easy to paint a conceptual picture. I know what I'm going to go look for. I'm going to look for a price. I'm going to look for a price. I'm going to look for a price. I'm going to look for a price. It's just been going between two specific price levels. Let's say it's between $40 and $50. So it hits a floor at $40 and goes right up to $50. And my plan, genius trader that I am, I'm going to buy when the stock gets down to $40, because it's at support or at a price floor, and sell if it rises back up to $50. Well, very rarely in real life do we see those big, round, perfect numbers.

Very, very rarely do we see the stock come down exactly to $40, or maybe it's down to $50. It's $40 and $50 cents or whatever, but coming down to exactly the same level before rallying, down to $40, up to $50, down to $40, up to $50. Rather, it might be something like coming down to $39 and change, and then going up, and the next time coming down to $40 and change, then going up, and then going back down to $39-ish again. But yeah, support tends to be an area as represented in our graphic here by this sort of gray shaded area. In a specific price level, which might be more commonly represented by a straight line, okay?

So that's one thing we need to bear in mind, because waiting for specific price levels can commonly lead to disappointment. It can lead to missing out on entry signals. Now, another concept that's quite commonly attendant to the concept of looking for support is that the more times support holds, the stronger it is. So for example, let's say we're looking at our example stock, and it had come down once and touched off a level of around $40, and then rallied. Well, that might be interesting. If it starts to get back down toward $40 again, we might look back and say, well, okay, last time we were in the $40 range, it went back up, might do it again. Now, contrast that with, and I'm going to exaggerate just to make a point.

Let's say that we have a situation where a stock has come down to $40, and then gone back up to $50, and then down to $40, back up to $50, down to $40, back up to $50. It's done that 100 times, and our trader is just waiting for that 101st time. Well, they might feel a little bit more confident that the stock's about to rally off the $40 than someone who's only seen this happen once in the past. So yeah, the more times support holds, the stronger it's interpreted to be by technicians. So all of this adds up to price floors. Let's go look at that. Look at some examples on real charts. So here's our ConocoPhillips example for the day.

And as we look back here over the last several months, let's put ourselves in the shoes of a trader who's looking for a price floor. So here you see that COP sold off down to around $102. 50, rallied up to about $115. At that point, there's a hint of support. There's a hint of the area where that support might be. But as we sell off from that $115 level, we come back down to around $102. 50. You'll notice we went a little bit lower this time, but still in the same general area. And we got another subsequent rally. Okay. Well, now this is starting to become an apparent pattern. And as we sell off, we get back down into that range again, around that $102.

50, a little bit higher this time, rally up again. Now this trader's starting to get a little bit more confident that he's going to get a little bit greater and greater confidence that they've identified a significant price floor. And if you look at what's happening with price at this moment, you can see why for a trader, they might be waiting for it to get back down toward that range again. There might be some that are willing to buy a little bit above that range, some that might be targeting inside that range. Others, maybe they don't do this at all. Just because we're talking about price floors and ceilings today doesn't mean this is the only way to do it. So that's one example. How about we look at another one?

Let's look at another one. Let's look at another one. Let's look at another one. Just to sort of drive home the point, but also to explore how there can be variations on this theme. If we look at into it, if you look over the last nine months here, really stretching all the way back to the start of 2024, this stock has really struggled to go below, if we can call that a struggle, below about that $600 level. You can see we've been down to $600 on a number of occasions, one, two, three, four, five, six, a bunch of times through here. There was one significant departure from that, though, where we actually fell as low as $560.

Now, for those of you who use or who are comfortable with the identification of, or at least this concept of looking for price floors and price ceilings, does this one event disqualify this as a potential price floor? I think that the argument might be made for some, no. That was an aberration. And the normal, the recent norm for this stock might be finding support right through there. But yeah, a couple of reminders here. There's a range of prices around that floor. And the number of times, the greater the number of times we get a touch at a price floor, the stronger that would be interpreted to be. Now, this obviously might undermine the confidence a bit for some traders. They might wish that it hadn't broken that floor that one time.

But overall, that's an example of price floors. So let's go and look at the other side of the coin. What about price ceilings? What about resistance? Again, we're talking about areas of supply and demand. But in this case, resistance or a price ceiling is an area where supply increases and where more investors are willing to sell than to buy. Now, what might be the conditions where there might be more sellers than buyers? Well, maybe prices have risen for a while. That can be more attractive for selling, maybe less attractive for buying. But this can work like a price ceiling, and it resists price from going higher. Now, like support, resistance is a general area, like this gray area, not a specific price as represented by this red line.

And the more times resistance holds, the stronger it is. But just to make this point again, traders sometimes refer to this as resistance because it's as though as price is attempting to go higher, there's an invisible force resisting that advance in price. What's really happening there? Just an imbalance tilted toward more sellers than buyers, very likely due to the fact that the price has gone up. And that's why we're talking about a price ceiling. And that's why we're talking about up to a pretty high level being attractive for selling. So how about we go look at examples again? And you may have noted on both of our charts, here, our stocks have been rallying up from price floors. And as price goes up, buyers are having to pay higher and higher prices.

Not so good. Sellers are maybe receiving higher and higher prices, possibly better. So you can see how that teeter-totter can shift from buying to making. And as we reach the ceiling in this example, prices start to get pushed back. So here we had prices rally up to just about 665-ish, that range. And we got pushed back, back down to that support level. Here we got back up to a similar range, escaped it for just a little while, maybe an hour or two. And we got pushed back. Here we got back up to that range and pushed back. So if a trader were looking at a chart like Intuit at this moment, and they're looking for price floors and price ceilings, might they be more inclined toward buying or towards selling if this is that approach?

Now, let's see if we had a, let's see, somebody asked a good question. All right. Yeah, that's, so that's just a sidebar discussion. That's great. I don't, I don't discourage that, but it's not a question I need to address. But yeah, they might be more inclined toward buying if they, if they agree that this looks like a price floor. And similarly with COP, it might look like we're closer to that price floor with the ceiling being up here, being up here in this range around 115. So it is not a cop-out. That's a pun, sorry. Not a cop-out or a technical trader to say my price floor, it's not at exactly 115. 63. It's in the range. It's in the range of $115.

Once again, the logic there being, if we're waiting for an exact price level, it may come up a little bit short of that and still fall within the definition of resistance. But if we're holding out for that price, maybe we missed that opportunity to take profits or to get into a bearish trade or whatever. I know, Crispy, no need for apology. That's great. So there are price floors and price ceilings, support and resistance. Now there's actually a little bit of relationship between the two. So there's a little bit of relationship between the two. There can be a transition from one to the other. So old resistance and old price ceiling, if it's broken, can become a new price floor and vice versa. So support and resistance, it's like a floor and ceiling in a multi-story building.

The ceiling on one level is the same, it's the same area as the floor on the next higher level. So for example, if you were in a multi-story building and you went down one level, you know that you're going to have a lot of resistance. So if you're in a multi-story building and you're your ceiling is that upper level's floor. And with price analysis, very commonly traders will assume a similar thing regarding areas of support and resistance. When support or resistance is broken, it can reverse its role. Old resistance can become new support or old support can become new resistance. So in our graphic here, we see a support level that's set up right through this range. We have no idea what price it is.

But when we look at it, we see a support level that's set up and we broke down through that. It's almost like they shifted to a lower story in a multi-story building, went down, found a new support and as it attempted to rally, now that old support is acting as a new resistance. And on it goes. So let's go see some examples of that sort of behavior in our price charts. So how about we look at AMT. So with American Tower, you see there was a sharp rally back here late 2023. It hit its peak or resistance right around $218. And this sold off. And really, price was not able to get above that level. And you can see a little bit of hesitation again right here.

As we got back up to that 218-ish level, see if you can climb into the minds of the traders at that moment. They're probably looking back, or some at least, might be looking back over near-term history and saying, 'wow, the last time we were up here, the buyers who bought right there really got stung hard.' And they were sitting on unrealized losses or maybe realized losses if they sold for months. And so to me, it doesn't seem surprising, at least applying these concepts of technical analysis, that there was more hesitation, maybe more sellers coming in than buyers willing to add new demand. But finally, we pushed up and through. Maybe there was a news announcement. Maybe there was an earnings announcement. Maybe there was an earnings announcement.

Maybe there was an earnings or something. So that pushed us up through that ceiling. And now that broken ceiling, that old resistance, transitions kind of like to a new floor. This might signal, kind of like a big sigh of relief. We got past that, and now traders may see this as a new normal, a new opportunity to buy at what used to be highs now can conceptually be seen as lows. And you see that play out on American Tower. rally continued shortly after the breakout, but then we pulled back down to that previous resistance, now a new support. We rallied down to that old resistance, new support again. So if we look at, this is actually a behavior that we'll see very commonly on stock charts.

So for example, if we look at NOW, this one is one that I'm gonna come back to, but this one established a trend line downward. We need to talk about trend lines again, but that trend line was acting as a resistance when we broke up through that acted as a new support. So speaking of trend lines, let's talk about their role in identifying support and resistance levels. So trend lines, just as a reminder, they're areas of support or resistance that are drawn diagonally. So just like other support or resistance areas, they connect areas of highs and lows. So we've been looking at sort of horizontal, horizontal areas of support and resistance, but floors and ceilings don't always present themselves exactly horizontally. Sometimes they will be climbing, other times they'll be declining.

So we just connect the highs and the lows. We connect the lows for bullish trend lines. We connect the highs for bearish trend lines. Little bit of a technical distinction here between horizontal areas of support and resistance and trend lines, horizontal support and resistance really only needs two points of contact to really start gaining strength. However, with trend lines, we typically look for at least three, that starts to establish a true upward or downward trend. Okay? But these trend lines might act as support and resistance. So let's look at a bullish example and maybe a bearish example. So let's go to our chart. We'll come back to NOW, W, but how about we look at ISRG first? So here's ISRG. If we go all the way back to late 2023, started to rise, this is one single touchpoint, right?

Not technically interesting to a trend line artist just yet. We rally up and come back down and we're in the area. Remember, we're not looking for specific price levels, but we're in the area of that trend line again before price starts to strengthen again. So we might be able to classify this as a second touchpoint. We rally up and where it really starts to strengthen, look at this cluster of activity as prices are climbing. One, two, three, four, five, six, seven-ish, eight, who knows? Number of touches in line as we draw a line with those lower levels. And now we're starting to establish a real trend where the trader is looking at this kind of like a ramp. It seems like every time the price escapes from this ramp, it comes back down to that level and then starts to climb again.

So we start to escape again here. We sell off and come back down in line with the previous lows, connecting those lows, starting to establish this trend line. And I think you can see conceptually how this might add to, for a trader who's looking for price floors, recognizing that generally prices are going up, but still going through a series of stair-stepping higher lows. And that's what we're going to do here. We're going to start to look at this kind of trend line. And I think you can see conceptually how this might add to, for a trader who's looking to get in at those lows, looking to get in at those lows may assist with the timing of the trades. Never a guarantee. Okay. Robin says, holy cow, that's quite the trend.

Yeah, the trends can persist for a while. It's interesting recently, though, we've had some touches here. What do you notice, though, about this price activity? Let's start to bring in our other analysis here. Could we make an argument that there's a pretty good area of resistance right there? Yep. For some, that might cause them to hesitate coming off this trend line again. Maybe they wait for it to break through that area of resistance. All right. Yeah, now we're starting to incorporate what we've just discussed earlier in this webcast. So that's a bullish trend line. Let me check my notes here. Ah, yes, a bearish example. How about we look at Disney? Disney, aside from this one single day event, looks like it was probably right before an earnings announcement. Somebody got excited.

They were wrong, apparently. But the stock had hit a peak and started to decline. As we're looking at the highs, the daily highs, we could just draw across those candles, start to establish a trend line. We have more touches here, more touches there. We got through that one time. But since then, this has really seemed like that's acting as a downward sloping ramp. So for a trader here, they might see this as quite a significant downward trend. Okay. So how might they be planning trades here? Well, if they're looking for a bullish entry, they may wait for a price to break up above and stay above that trend line. And also, interestingly, once we did that here, what's going on with a new trend line for Disney? We might look at this.

There's one touch. There's a second touch. There's a third touch. We may have a new established upward trend line. Okay. Chris B., you were looking at that last chart and saying maybe there's a triple top or just a really pretty significant resistance. And when I say significant, I'm qualifying that as because it has so many touches at or near the same level. Yeah. Very good. So there's our trend lines. Well, trend lines can sometimes be combined into what are known as channels. Once again, just areas of supply and demand. But channels are areas of support and resistance. So if you look at the chart here, you can see that there are channels that are parallel to one another and they can add potentially a double benefit to the trader.

Not only might they establish lows in this effort to buy low, but also they might establish highs if we have an offsetting effort to sell high. So yeah, we have in this case, in our channel example, in our graphic here, we have a channel that's going up. Channels can go up, down, or side. But each of those types are conceptually tradable. But price breaking above a diagonal resistance in a channel can indicate increasing bullish action. Price breaking below our channel can be a sign of weakness in a trend. And price breaking support or resistance in a horizontal channel can be the start of a similar channel at a lower or higher level. So let's look at some examples of channels on our charts. Let's go to our charts here.

How about we have a look at, how about JPM? So here we have an area of support. We have price coming down, more buyers coming in, sellers maybe not so attracted to the recent lower prices. Maybe the buyers are specifically attracted to the recent lower prices. Price starts to climb off that one level. Is this a trend line yet? Well, maybe. If we extended it back to that one, it actually looks like that's fairly in line. Matter of fact, I wasn't planning to do this, but let's just add here, it's possible that we have an old resistance back here acting as a new support right there. But in any case, well, maybe we can incorporate this as a touchpoint. And if this is old resistance, this might count as a touchpoint as well.

So it's quite possible that by the time we got to this third low-that could count as a new trend line. But we have an upward trend line at support that's accompanied by, as a matter of fact, let me right-click here. I'm going to extend that line to the left. Boom. There we go. Anyway, but there's our channel. We call it a channel just because, like, if you think of any sort of a channel, it has two banks or two sides. But in this case, we come off the support. We rise up to resistance. And for a trader who's trying to buy low and sell high, their plan might be, I'm going to buy toward the channel low, sell toward the channel high, as other sellers come in. Okay.

Now, Isaiah's looking at-Isaiah making an observation about a specific entry signal, right? We're going to get into that in a future webcast in this series. Okay. Let's see. Frank says, at what point do you look at different timeframes? Oh, good question, Frank. I'm glad you asked that because in this demonstration, I'm going to be sticking with one-year daily charts. Does that mean that support and resistance and trend lines and channels only apply on a daily chart? No, actually, conceptually, these techniques that we're learning are portable from one timeframe to the next. Are there possibly traders who look on an hour-by-hour basis using horizontal support, using horizontal resistance, using diagonal support and resistance, using channels? Yeah. Yeah, I feel quite confident saying, yep, almost certainly. Are there also technical traders using weekly analysis rather than daily candles?

Yep. Is there any new information that I should be adding for those different timeframes to the concepts of areas of support and resistance? And the more touches, the stronger the signal? No, those are- those are sort of universally applicable to different timeframes. Now, regardless of the timeframe though, support and resistance, they're not a guarantee of performance on any individual trade though, right? So, we got a number of touches at support. We got a number of touches at resistance. So, once again, put yourselves in the shoes of a technical trader who's looking for these areas, looking for highs and lows, looking for buying low and selling high. What it appeared to be right now would be the-Yeah. It would be the time through this technical lens to be getting into shares of JPM.

Nope. You can see the value that might add, especially if we peel off from here and go back down to the lows. So, let's see, do we have-let's have another example. COP actually, if we go back to that, it is itself a channel. So, with JPM, we had an upward channel. This is more of a sideways channel where we're going back and forth between support and resistance. And that's seen by traders as being tradable, right? We can buy at lows, we can sell at highs, but also for some, they may actually look at the middle of those. I'm going to get rid of these drawings here. Let's right click here. I'm just going to clear the whole drawing set, and I'm going to replace that using our channel tool. Yeah.

So, channels actually merit their own tool on thinkorswim. So, I'm going to select the channel tool, and this allows us to draw parallel lines. So, let's come down here to the support. I'm going to click once, move over to the other side of support and click again. And what that does now is it activates a second line that's ready to go. I just position that second line where I want it. It is parallel to the first line. And when I make my third click, it positions that line. And now we have that channel. Well, you might notice, actually, on a couple of these moves, we came up somewhat short of the support level. And that actually is a pretty good illustration of the concept that within a channel, sometimes the midpoint of that channel can act as support or resistance by itself.

So built within the channel tool, if we right-click on our drawing here, we can edit the properties of that drawing and we can add a 50% line, that's a midline. So if I click OK, I'm gonna leave that as a solid thin line, a one out of five in width, instead of being sort of a thicker blue dashed line, I'm gonna leave that a solid thin black line. But as I click OK, you can see how that's interesting, right in the middle of that COP, that acted as a support level. And so for some traders, they see that as a potential second area for maybe where they get into new bullish trades or possibly just take profits on bearish trades.

But I wanted to demonstrate that it's a tool, but also a concept and technical analysis that can sometimes add some value. All right, so we'll see if this continues down to that support level and we get a bounce. So we've talked through a series of different ways that a trader might identify price floors and price ceilings. We can identify just horizontal level support, horizontal levels of resistance, diagonal levels of support, diagonal levels of resistance, channels, midpoints, points of channels. There's one other that I wanted to talk about, and that is when we get what are known as price gaps. Okay, let's go to our slide deck here. With price gaps, they occur at a time of extreme supply or extreme demand. So if there's a lot of buyers, hardly any sellers, what can happen is overnight, price can gap up.

If there are a lot of sellers, not as many buyers, overnight, that imbalance can cause a gap down or in between shorter term timeframes if we're looking at hourly charts or longer term timeframes. We can look at weekly charts over the weekend, for example, it might create a gap. But gaps occur when orders flood the market before it opens and gaps can create another level of support or resistance. And generally speaking, the more extreme, or in other words, the larger the gap, it's often considered a more significant area of support or resistance. So as we're looking at our chart here, we already have a resistance level that has set up here. You can see that price has been up to this level a few times.

So a trader might already be looking at that as a price ceiling. But then something got investors excited. Lots of demand came in overnight. And when trading resumed the next morning, it created this gap. So you see price went from the red candle down here overnight, to the green candle up here. And traders can sometimes be reluctant. This is the concept behind a gap of support. Something very exciting just happened, probably, right? And traders express that excitement in reluctance to go back down into that gap territory. If price peels back, as maybe a few people take some profits here, there may be residual enthusiasm that causes that price to rise again. And the top side of that gap may act as a new support. Now, sometimes price just runs off.

And we never come back down to that gap. But if we do, an initial technical assumption there is that the top side of that gap is likely to act as support. So let's go look at this. We'll look at maybe a top-side gap, and then maybe a bottom-side gap, a bullish gap and a bearish gap. So if we look at, for example, RTX, here is a moment where maybe a trader already suspects a bit of resistance right here. But look at where we closed trading on July 24th, open trading on July 25th, there is a gap in price there. And it's about the biggest one of the year. When there's a gap like that, the technical assumption is here, price should either run or if it pulls back, it's going to go down.

Maybe the lowest it gets to is back down to that gap side low. In this case, we didn't come back down. Came back a little bit and price continued. Here, we had another gap up, and you can see how that low really wasn't never violated. Here we had another gap, and that low worked pretty well as a new price floor. So that, that's, a fair lot of reasons. Typical of the assumption of a of an upside gap, very likely to act as a new support is the assumption it's not guaranteed. What about a downside gap? Oh, and maybe now let's look at Disney, so Disney was our down trending stock with an uptrend here I'm going to right click on both of these, let's just clear that whole drawing set so it's nice and clean but Disney has an example of both kinds of gaps.

Here we had a big gap right there on February 7th to February 8th, big gap up and an assumption here is this is likely to be a new support, yeah in this case we peeled back there was a slight penetration there for maybe I don't know, a couple of hours but that acted as a pretty good support and price rose substantially from that level so from what 107 all the way up to about 123. And then we had a big gap right there on February 7th to February 8th, big gap up and an assumption now after that it looks like investor sentiment Shifted and right here we had a nice bullish day, and then really, a comparative collapse in price, so what's the assumption here when we have a gap down that is likely to be the new ceiling?

In this case, there was a modest rally within a few days, and then we sold off from there. Now, as we talk about gaps though, has anybody heard the phrase 'and I'm keeping my eye on a chat'? I think it's just a sidebar discussion again, um have you ever heard the phrase 'all gaps fill'? That's anytime you hear 'all' or 'every' or 'always', you know these these... absolute terms. There are a few, there are very very few absolutes in trading right? Technical analysis if We have an absolute that becomes essentially a guarantee, there aren't any gaps in the market, so that's a good assumption. There's a good assumption that there are no guarantees in technical analysis, and as a matter of fact, the assumption is not that the gap is going to fill.

If we get an upside gap, some upside gaps, and as a matter of fact, quite a lot of them never fill. If we have a stock that's going up and it gaps up, then just continues on its merry way, and the company continues generating profits and there continues to be shareholder enthusiasm. And you get a company like General Electric which has been around for 100 years. It's possible that the company continues to be generating profits and there continues to be shareholder enthusiasm, and you get a company like General Electric which has been around for 100 years. It's possible that the company continues to be generating profits and there continues to be price levels so um never being you know until it does right, we'll have to see if some company is able to last forever.

But with downside gaps, that more commonly those do ultimately fill unless the stock just continues on down to zero. Right, downside gap, if the stock is just wavering around even if it has a sustained downward trend as long As it's going to stay the same, pulls out of its tailspin, yeah, it'll eventually fill that gap. But yeah, the statement, all gaps fill, yeah. Tamalee says, I heard gaps usually fill. Okay, maybe we can make an argument for that. And by the way, is there a timeframe associated with that? Nope. The take-home message here is that a gap is not assumed to be, it shouldn't be assumed that it's going to fill soon. That's the opposite of the typical technical assumption of a gap in either direction.

It should initially be a new area of support or a new area of resistance. However, if, like here's an example on Disney that did fill. And what we mean by fill is when we have a gap down, it creates this window, right? This space. And the assumption here in the case of our downside gap is, shouldn't this be, and maybe I'll zoom in a little bit more so you can see what we're talking about here. Shouldn't this be our new price ceiling? Well, it sort of was for a few days, but here we penetrated into the gap. And in that case, the trader's assumption flip-flops. If we break into that gap, now the assumption becomes, okay, now the gap is likely to fill. Is it a guarantee that it's going to fill?

No. But in this case, there's Disney, went right up to the top side of that gap, and then pretty shortly started moving down again. There we go. So guys, we've accomplished what I set out to do today. We wanted to talk about this idea of buy low and sell high. What might a trader be looking for on a chart? And there are a number of things that they might be looking for, but basically they're looking for support and resistance. We talked about the basics of support and resistance. Identify support and resistance a number of different ways, including trend lines and how they can act as support and resistance. And we brought them all together with examples on current price charts. So I hope you enjoyed that discussion.

It's about time for me to let you go. But before you do, I do have a few requests of you. Number one, David, you like that? Hey, you're welcome. Yeah. It's always an interesting discussion, isn't it? Yeah, we do this each Tuesday, talk about technical analysis, try to get better at one concept of technical analysis. So I hope that you'll join me again next week for Lesson 5. But between now and then, just remember you have other resources available to you to continue your education, including following your favorite coaches on X. So you can follow James there at JamesBoydCS. You can follow me on X at CameronMayCS, but it is the best place to connect with us in between the live streams. It doesn't cost anything to follow us on X.

Also, it doesn't cost anything to subscribe to our Trader Talks channel. So make sure before you go, if you haven't subscribed, click on the subscribe button down below. Trader Talks, our YouTube channel, is the best place to find our previous webcasts. We've organized those into videos in playlists, which are by series and by topic. So you can get very, very targeted education that way. But of course, you can also join our live streams right there, right? Now, James, you've done a fabulous job out there in chat. I don't see any survey for this webcast, so we'll just look for that next time. Well, whenever it pops up again, we never know when a survey is going to be offered.

But yeah, follow us on X, subscribe to our channel, but also thank you to everybody that's already given me a thumbs up or a like out there. And YouTube, we can see. It's always appreciated to give that thumbs up. It feels like a pat on the back to the presenter. And it also helps that presenter's webcast get a boost in the YouTube algorithm. So if you just make a habit each time you enjoy a presentation, click that thumbs up as your last thing before you close out and go on to the next webcast. Okay. And that's true for whether you're attending the live webcast or you're watching the archive, but everybody, thanks for giving me your time today. I'll look for you; look forward to talking with you in our next webcast lesson five coming up the next week, or you can just move on to it. If you're watching the archives, I'll also look for our next, or maybe I see you in a future webcast outside of technical analysis, but hey, whenever I see you again until that moment arrives now, I wish the very best of luck. Happy trading. Bye-bye.