Yesterday morning, during my Pre-Market Prep session, GameSquare Holdings (NASDAQ: GAME) showed up on my radar.
I had a feeling it was going to make a big move at some point later in the day.
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So, do I have some secret power that told me GAME was going to spike yesterday?
Ha! I wish…
No, but I did see something on the chart that made it highly probable.
You’ve probably heard the term “Technical Analysis” thrown around a bunch of times…
And if you’re a new trader, maybe you’ve thought, “Technical? Like programming?”
Nope, it’s not coding. It’s about charting stocks.
And when we talk about technical analysis, we’re diving into price action, candlestick patterns, and the visual story a chart tells.
Out of everything, I like to focus on two critical concepts: Support and Resistance.
Table of Contents
Technical Analysis 101: Support and Resistance.
When we’re analyzing a chart, what we’re really doing is identifying spots where buyers or sellers have made strong moves before, and where they’re likely to do it again.
These levels can lead to breakouts (stock surging through a price ceiling) or breakdowns (falling through a price floor).
Let’s say Stock XYZ quickly spiked from $4 to $6…
And then it pulled back.
Still, that $6 level kept showing up. Time and time again, the stock tried to push past it, and failed.
Why?
Because everyone who bought that big spike before the pull-back was bag-holding. And once the stock came back to $6, they just wanted out.
That creates selling pressure, which is what we call resistance.
Eventually though, the stock breaks that $6 level on volume…
And then, boom! It runs straight to $10.
Why the explosive move?
Because when those old bag holders finally get green, they stop selling, and new buyers rush in. That’s when resistance becomes support. $6 is now the support level for XYZ.
Remember this: the more times a level gets tested and fails, the stronger the move becomes once it breaks.
What Happened With GAME?
When I forecast the big move in GAME during my Pre-Market Prep session yesterday, I had already seen something on the chart that happened very early during the pre-market hours.
By the way, if you want to learn more about Pre-Market Prep, which is just one part of my Daily Income Trader System, register for one of our free daily webinars.
GAME had broken out above its daily resistance level of $2.15 per share.
At that point, I knew it wanted to retest that level and make another breakout…
And it did!
And what confirmed it? Increasing volume.
Volume confirms breakouts.
Here’s yesterday’s chart:
GAME Intraday, One-Minute Candles Chart; SteadyTrade
How to Avoid Becoming a Bag Holder
One of the first lessons in Trading 101 is this:
Always set a stop loss…
And do it before you enter the trade.
If you don’t know where to set it, use the chart!
For example, if a stock breaks out of resistance, look at the previous support level, and place your stop just below that.
So if a stock broke out at $14 and support was at $12, use $11.50. Now you’ve got a clearly defined risk level.
If it breaks below $12, the idea’s broken, and it’s time to move on.
That’s trading.
Not every trade works.
If you know how to take a loss the right way, by using a stop loss, you’re trading smart.
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My Final Thoughts…
This is technical analysis in action…
Identifying price levels, watching volume, and understanding psychology.
But it takes time, and it takes repetition.
It’s a learned skill.
I’ve been doing this for 15+ years, and now, these charts just make sense to me.
But if you’re just starting, don’t worry. Practice, practice, practice…
Look at charts every day, and practice drawing levels.
Just like all things in trading, and in life for that matter, keep at it, and eventually everything will become second nature.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
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