How to improve the probability of success for your swing trades？
The monthly central level provides a high-level "compass" for the overall security direction and sentiment throughout the entire month.
A daily chart might show intraday pullbacks, but if the price remains above the monthly central level, the broader bullish sentiment for the month would still be considered intact, and vice versa.
Mid-Term Bullish Bias: If the daily price action is consistently trading above the monthly central level, it generally indicates a strong underlying bullish sentiment for the entire month. This suggests that the bulls are in control on a larger scale.
Traders and investors will look for price to reach higher monthly resistance levels when the price is above the central level, and vice versa for support levels when the price is below the central level.
Trading below the monthly central level confirms the overall weakness of the asset or market for the current month.
This makes them ideal for position traders and those with a mid-term investment outlook. They provide a broad, overarching view of the market's sentiment for the entire current month. A strong move past a monthly resistance or support can signal a powerful trend continuation or reversal on a larger scale.
Strategic Planning: Use monthly levels to establish your monthly bias. If you're fundamentally bullish on a stock for the medium or long term, but it's trading below its monthly central level, you might wait for it to reclaim that level before increasing your position, or use the weekly levels to manage risk in the short term if the chart is showing signs of a bullish reversal conquering weekly resistances.
Setting Long-Term Targets/Stops: Monthly resistances or supports can be used as more aggressive long-term profit targets or wide stop-loss levels for position trades.
Combining Monthly and Weekly Levels
This is where the real power comes in. Don't use them in isolation.
Start with the Big Picture (Monthly Levels): First, identify the monthly central level and its S/R levels. This sets your primary bias. If the price is above the monthly central level (bold and underlined number with blue background in the tables below), your default stance might be bullish and pullbacks would be confirmed as significant bearish reversals when the central monthly level is lost.
The weekly example provided the levels for the indices in the table above, the example for the monthly levels is for the Magnificent Seven stocks, metals, and crypto ETFs. The central level is highlighted in bold and underlined format.
Refine with the Medium Picture (Weekly): Then, overlay the weekly central level and its S/R levels. The ones for the week that just ended were:
Confluence is Key: Look for instances where a weekly central level aligns closely with a monthly central level or a monthly S/R level (two lines combined are relevant even if it is a weekly central level and a monthly resistance level. These areas become stronger than when the lines are separated among each other.
In the actual case for the week that just ended, $203 was a strong level for AAPL, considering the alignment between the weekly and monthly levels. On Friday, that zone was breached. Similar case for IBIT, the biggest ETF for Bitcoin, $59 is a strong zone that as of Friday provided support.
Trend within a Trend: Staying above both weekly and monthly central levels indicates bullish momentum, there are usually pullbacks when this condition persists for several weeks, since the price becomes overheated relative to oscillators.
Warning Signals: If a weekly downtrend breaches monthly support, it's a stronger signal of a potential long-term reversal than just a daily breach.
Move down to your preferred trading timeframe (e.g., Daily or H4 for swing trading, H1, 30m or 15m for day trades and shorter swings) and overlay the monthly and weekly levels.
By doing this, you're ensuring that your trades are aligned with the prevailing sentiment on a more significant timeframe, reducing the noise of shorter-term movements and improving the probability of success for your swing trades.
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