Today’s stock is a great example of when a former resistance level is broken, and then becomes the next level of support. This idea of resistance turned support means that a previous level of resistance is broken as the stock rallies up through that price, but then retreats back toward that same price soon after. While this rally may be well defined on the stock’s push through it, what goes up must come back down… even if just a little bit.

In the video below, you’ll see a great example of this play out on software developer, Salesforce (CRM). The $150 price was a previous level of resistance, but as the market rallied, so did CRM. This bullish run lifted the price up through $150 only to fall back down to it a few days later. This pullback is known as a “retest”, where the stock falls back to the previous level of resistance.

The fall to this price and the holding of it is the test, you’re retesting this level to see if it confirms. If the level holds, so does the rally. The stock then looks for its next level to break. Here we have a break through $160, which has led to a test of $165. The $160 level should now provide support (previous resistance), while a push above $165 could lead to much higher prices.

Check out the video below to find out more!

If you’re interested in joining The Profit Machine, now is the time. In the midst of a bull run like this, you want to be trading, but you also want to know what you’re doing. There are too many amazing setups and too much to learn to be sitting on the sidelines during times like these.

I’ll help you accelerate your educational journey, so you are better equipped to become a more consistent, more profitable trader. Join my students and I as I break down the market and teach you how to trade options. Sign up today. Until then…

Good Luck!

Christian Tharp, CMT