Let’s go with the questions:
– What is the reason why, at a certain time in which the price of an asset than a support or resistance very obvious and clear, the price behaves as expected?
– Is it true that there is an «invisible line» in the quote by which the price should break or bounce?
– Is there a plot by large investors and governments committed to be met assumptions of technical analysis to maintain balance in the universe?
– Who determines the location of that line and bounces off support why or why if the fall occurs through it?
– Why simple technique for a signal (support / resistance) very clear … prediction were right on many occasions?
– Why is reluctant to quote prices through round numbers composed? that is «to overcome the psychological barrier»? perhaps an asset itself knows how to act in these levels?
– Does the bag own intelligence?, Does psychology?
Well, incredibly, those most responsible for all this to happen we have them close by, … ourselves.
They are traders, speculators and investors who actively affect the evolution of the market price.
An analogy of this would be: If I go to a nightclub because I think that «few people will» … and then I learn that remained empty, I happened by chance? or what happened is that everyone thought the same as me? … and it came true!
So easy is the explanation. From time to think of something eventually becomes reality, both repeat a lie it becomes truth … where Vincent goes? where the people go.
And so many traders, investors, financial advisers, broker, economists, journalists, many automatic trading systems detecting support and resistance, many entities led by the most basic technical analysis patterns, many thinking, for example, that there is a clear signal that a quote that will fall, all sold. And to do it themselves will make his prediction come true.
Under this hypothesis should be very attentive to the basic techniques clearer signals (discarding the rest), as the vast majority will follow the basic premise of technical analysis, and given the support and resistance levels act accordingly, moving themselves the market.
Regardless of who does not have any logic, we should not miss the opportunity to jump on the bandwagon of money.
Although it is stupid to think that a price «bounce» for 3 ½ months ago he did the same «support line», although it is a folly to believe that trading has its own life and rebounds to a point with a price «round». All this will make it so thinks will happen most of the market, and this belief will create the fact. In the end we might think … maybe someone invented the technical analysis to give dynamism to the market?
What is clear is that such analysis besides not predict anything, rather it seems that induces something.
Rafa.