Midas Analysis

Trading and Technical Analysis with MIDAS

Hierarchies of Support and Resistance (expanded to ticks)

 

Let’s expand the previous session, detailing the later part of the day, since there’s a lot more we can show.

 

We usually see MIDAS applied to time-based bar charts, such as minute, hour, month, etc.  MIDAS can be used just as well on tick charts, such as the 266 tick chart shown above.

 

We’ve shown how MIDAS illustrates support and resistance lines.  Launched from various pullbacks, we can produce MIDAS curves that capture every future pullback with excellent accuracy.  Three of the curves shown are natural locations we’d launch them from.  One (turquoise) is slightly unusual because it’s a minor pullback, but it has value since it demonstrate the subsequent sideways movement, catches the next 2-3 minor pullbacks accurately, and about an hour later it captures a major pullback perfectly.

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.