Confirmed Price Resistance Or Support Reject Chart Pattern

Chart reading for relevant price and price action that leads to continuation or reverse is a large part of our trading method strategies and setups.

And a confirmed reject of price support or resistance is a chart reading pattern that is used for trade management, along with the entry timing for short options trades.

Although this isn’t our only setup for selling options, the confirmed price reject pattern is very good for showing short options entry timing then initial movement in the direction of a trade, if not leading to a swing reverse.

Think of what this chart pattern is intending to show.  This is a combination of price failing when trying to go through support or resistance, along with a momentum extreme, which increases the odds for the options short sell becoming profitable.

Confirmed Price Resistance Or Support Reject Chart Pattern Video

Price And Momentum Extreme Chart Combination

Let’s go through a couple of charts and drawings and discuss the components of the confirmed reject pattern, along with some of the things that might be confusing when reading chart reading.

I especially want to point out how a chart pattern misread might lead to an option short sell being done into what is actually a stock trade setup in the opposite direction.

I mentioned that a price and momentum extreme, followed by the confirmed price support or resistance reject, can be used for trade management and short options timing:

  • Trade Management:  (1) profit taking (2) trailing stop and/or scenario for continuation – scenario for reverse after the extreme
  • Short Options Timing:  Most advantageous location to short options [and buy option to complete ratio short] because this is where you will get the best relative prices
    • Calls will be the highest price to short at a resistance extreme [puts will be the cheapest]
    • Puts will be the highest price to short at a support extreme [calls will be the cheapest]
    • Chart Pattern
      • Support or resistance reject
      • Momentum extreme
      • Confirmation pattern

Confirmed Price Reject Compared To Price Continuation

I am going to end this video discussing this drawing that compares the confirmed price support or resistance reject pattern, with what can be considered a reject but is actually a price continuation pattern.

Price Reject Only And Price Swing Continuation Pattern

The differences are important to visualize to keep from taking a profit and/or shorting an option right into a trading method continuation setup.

  • Specifically note the single reject of price, without a break and retrace back to the price
  • With MEx moving in the direction of the reverse on the retrace-reject
  • That is the confirmation pattern we are looking for

We will do additional trading method chart reading videos discussing price rejects.  In this video, we discussed the confirmed support and resistance reject into a reverse – in the next video we will discuss a price reject that continues the current trading swing.