Midas Analysis

Trading and Technical Analysis with MIDAS

Hierarchies of Support and Resistance

I’d like to demonstrate a live trading period and the hierarchy of support and resistance curves that MIDAS reveals.  Coming into the market mid-day (9am PST in this case), you can see the market has made some early highs, come down quite a bit, but appears to be bottoming.  Launch your MIDAS curves from the major swing highs/lows (see R1, R2, S1, S2).

 

These curves have some notable features.  R1 has already proven itself quite accurate — serving as a resistance up to the R2 curve.  In fact, the swing high near R2 was largely a bounce from R1 (off by 3 ticks).   Once the market is in a downtrend, moving away from the midas lines, we wait for it to form a bottom or come back to retest.  S1-S3 capture what appears to be some bottoming.  As price moves between S1 and R1, I’d consider it in something of a limbo state.   Indeed, price chruns sideways for the next hour an a half.

 

As price comes down to retest S1 (near S5 launch), I setup an entry if it breaks R2.  Indeed, it does within 10 mins.  S5, launched from the last swing low, will be used as a stop.  As price pulls up, it bounces off of R1, which can be expected.  Coming back down near S5 (and R2), it bounces, and slices through major R1.  The market does a quick retest of R1, and then jumps outside of the trading range.  While this could be a good time to close the position and lock in gains, we can also follow it with S5-6 as supports.  Over the next 2 hours, it bounces from S6 three times, twice close, and later with some suspension.

 

 

From the outline above and the chart, a few points stand out:

  • MIDAS curves form a powerful hierarchy of support and resistance.
  • MIDAS is often most valuable when price is trending.
  • MIDAS S/R lines can be highly accurate in capturing moves, but some caution is required, since it can be off by several ticks
  • The area between major S and R curves is in a state of limbo
  • MIDAS curves do not always serve as clean support and resistance lines, where we’d expect a reversal or up move.  R2, for example, was the center of an extended sideways move.  It signified a major area of market decision, but the market volleyed across it.
  • After an extended period, S/R lines all converge as the VWAP nature of MIDAS brings the curves together.
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