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.