Tesco Gap

Hi Amo,

Yeah, sorry about that. I knew it was a bit confusing when I pressed the submit button but hey ho - a bit of thinking never did anyone any harm

Keep an eye on where this closes today. It's very early but there's a good chance of a shooting star right at the 351p resistance as it's looking now. FTSE's also been close to major resistance of 6100 today so could help us.

PS My limit order got hit so I'm already short so beware bias

Cheers mate, I understand where your coming from, especially with the risk/reward aspect when waiting for a back test.

I have to admit I had to read the below paragraph more than once for it to sink in. I got there in the end though

Jackozy wrote: In TSCO's case, if 351p does prove to be resistance this time round then I'd look to close my short and go long at a strong support in which case I won't need to worry about it too much as I'll close the long at 350p and simply reopen it if it goes above knowing that I've got additional margin from previous profits....hopefully!

and there was me still waiting for the gap from the 5th Dec.

PS From an EWT argument the most likely time to break through a horizontal support/resistance is on the 3rd attempt which is another reason why I don't think TSCO will go through this time. You never know for sure though so I'll be prepared either way.

No worries, Amo.

For me it depends on where the nearest other support is. By waiting for a backtest you're getting a lower entry (if going long) than by waiting for an entry after closing above the resistance but you risk it not backtesting at all.

If you just buy at where it opens after closing above the resistance then you'll be in negative territory if it does backtest and your loss will be greater if it turns out to be false so waiting for the backtest is better from a risk/reward POV - you just have to accept that it may not backtest and be prepared to walk away from the trade. On the other hand, if there's another good support just below the breakout level (like a gap) then you may feel that the risk/reward still works for you with a stop below the secondary support.

In TSCO's case, if 351p does prove to be resistance this time round then I'd look to close my short and go long at a strong support in which case I won't need to worry about it too much as I'll close the long at 350p and simply reopen it if it goes above knowing that I've got additional margin from previous profits....hopefully!

Cheers Jackozy, I'm just trying to understand the significance of backrests of support/resistance when taking positions.