by Johan Kriek (jkriek@fxinstructor.com)

When a resistance level is successfully penetrated, that level becomes a SUPPORT level. Similarly, when a support level is successfully penetrated, that level becomes a RESISTANCE level.

Below follows an example of how resistance becomes support:

When price broke above the resistance level of 0.8470, the level of 0.8470 became the new support level.

This is because a “new generation” of bulls who had not bought when prices were below 0.8470 are now anxious to buy any time prices return near the 0.8470 (we can assume that those bulls did not have any bullish expectations when price was below 0.8470)

Similarly, when prices drop below a support level, that level often becomes as RESISTANCE level that prices have difficulty in penetrating.

When prices approach the previous support level, traders seek to limit their losses by selling. Have a look at the chart below:

See where you can identify similar situations in the market as depicted above. You are more than welcome to send me an email at jkriek@fxinstructor with your questions or just post your comments here

Enjoy the rest of your US session!

Johan