Support & Resistance
What Are They?
Think of a stock chart like a ball bouncing in a room. The floor is support — every time the ball hits it, it bounces back up. The ceiling is resistance — every time the ball hits it, it gets knocked back down.
These levels aren't random. They exist because massive institutional algorithms — Vanguard, BlackRock, Fidelity, the ETF rebalancers — have programmed buy and sell orders at specific price levels.
Price Bouncing Between Walls
Here's what it looks like using real PLTR levels. The stock bounces between ~$147 support and ~$165 resistance:
Every time PLTR rises to ~$165, sellers knock it back down. Every time it falls to ~$147, buyers catch it. The stock is trapped between these two walls. The yellow dot is where PLTR sits today — right on the floor.
Why These Walls Exist
Support and resistance aren't random lines. They exist because big institutional money — the algorithms at Vanguard, BlackRock, Fidelity — have programmed automatic buy and sell orders at these levels.
When PLTR hits $147, algorithms at multiple institutions fire buy orders simultaneously. Millions of shares change hands. That's what creates the "bounce" — real money defending the level.
How to Find Support & Resistance (Ed's Method)
Ed's method is straightforward. Start at the lowest point on the chart — that's your first support. Find the next high after that low — that's your first resistance. Keep going: next low = new support, next high = new resistance. Connect the dots.
The key insight: the more times a price level gets touched, the more significant it is. If PLTR bounced off $147 once, that's minor support. If it bounced off $147 four different times over six months, that's major support — a lot of institutional money is parked at that level.
Major S&R: Long-term trends, heavy volume at those levels, multiple touch points across different time periods. Ed changes line colors for major levels.
Minor S&R: Shorter-term bounces, light volume. Stock quickly resumes its trend. Less reliable.
Volume confirms it: If the bounce happens on heavy volume, it's major (big money defending the level). Light volume bounce = minor (could break through next time).
When Support Breaks — The Floor Becomes the Ceiling
This is where it gets interesting for options traders. When something changes the math — bad earnings, sector repricing, a shift in sentiment — the big money reprogram their levels. The old floor disappears and nobody's there to catch the stock anymore.
Once $147 breaks, the same algorithms that used to buy there flip to selling. The stock might try to rally back to $147, but now it gets rejected — old floor, new ceiling. The next support level below becomes the target.
This is Ed's thesis on PLTR right now. He's watching for an inverted cup and handle pattern on the 3-year weekly chart. If PLTR breaks below the $147 support on heavy volume, the next move could take it toward $130 or lower.
How This Connects to Your Options Trade
If you're holding a put option, support and resistance directly affect your P&L. The stock moving toward your strike makes you money. Support breaking is the catalyst.
The Takeaway
Support and resistance are the map. They tell you where the big money sits, where the stock is likely to bounce, and where it might break through. Ed draws these lines on every chart before taking a trade — they're the foundation of everything else.
When you combine support & resistance levels with the Go Maz scoring rules, expected move, and standard deviation, you get a complete picture of whether a trade is worth taking — and where to get in and out.