Support & Resistance from Candles

Candlesticks are not just for spotting reversals — they are excellent tools for identifying support and resistance levels.

How Candles Reveal Support

Support is a price level where buying pressure is strong enough to overcome selling pressure. On a candlestick chart, support appears as:

1. Long lower wicks — buyers stepped in at those lows

2. Multiple touches — price bounces from the same level several times

3. Bullish reversal patterns — hammers, bullish engulfing at the same level

4. High volume candles — large bodies near the same price

How Candles Reveal Resistance

Resistance is a price level where selling pressure is strong enough to overcome buying pressure. Signs include:

1. Long upper wicks — sellers rejected those highs

2. Multiple rejections — price fails at the same level repeatedly

3. Bearish reversal patterns — shooting stars, bearish engulfing at the same level

4. Low volume above — few trades happened beyond that level

Building a Support and Resistance Map

Step 1: Open a daily chart for the pair you are trading Step 2: Scroll back at least 3 months Step 3: Mark levels where price reversed sharply with long wicks Step 4: Mark levels where price stalled with multiple touches Step 5: Note round numbers (e.g., 1900, 1950 for gold)

Candle Clusters

When multiple candles have long wicks at the same level, that level becomes more significant. A "cluster" of wicks acts as a magnet — price tends to return to these levels.

Inside Bars and Signal Bars

An inside bar occurs when a candle's high is lower than the previous high and its low is higher than the previous low. It signals consolidation and often precedes a breakout.

Signal bars are candles with decisive closes — a strong close near the high (bullish signal) or near the low (bearish signal).

Volume Confirmation

Candles with high volume are more significant than those with low volume. A support level tested with high-volume bullish candles is stronger than one tested with low-volume candles.

Practical Exercise

Take a gold chart on the 1-hour timeframe and find: 1. Three support levels where long lower wicks appear 2. Three resistance levels where long upper wicks appear 3. Any reversal patterns at those levels

This simple exercise will dramatically improve your ability to read any market. In the next lesson, we will cover specific reversal signals.

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