Commodity Strategies: High-Profit Techniques for Investors and Traders

CHAPTER 5

Other Strategies and Tools

In the first several chapters we laid out the basic building blocks of Point & Figure charting as they pertain to the commodity markets. These previously discussed topics provide a solid framework for analyzing the commodity market on a more macro level. Now, we want to expand your knowledge even further, adding to your toolbox other techniques and strategies for you to use when trading in this marketplace. In this chapter, we focus on supplemental topics and indicators, ones that will aid in refining your entry and exit points—and basically give you tools that drill down a little deeper, to a more micro level of decision making with respect to initiating and managing the position.

SUPPORT AND RESISTANCE

When talking about support and resistance, and what these termsmean, we are referring back to the trend chart of a given commodity. (This will be the case with respect to several of the new topics we will be discussing in these next pages.) One of the keys to trading commodities on a technical basis is being able to properly analyze the technical condition of the underlying commodity.

Support is basically a level where the commodity stops moving lower in price. For whatever reason, selling pressure begins to wane as buying pressure begins to takes control at a given price. The commodity is in essence passing from weak hands to strong hands at this point. On a Point & Figure chart we would begin to see some back and forth motion generally producing ...