Changes of Expectation in Investors and Speculators

Something that should always be kept in mind is that the expectations of the investors and speculators change with time are influenced by the rumors and also by the infiltration of privileged information. When this occurs, very abrupt changes occur in the levels of the support price or resistance. Once the public admits that such stock can be moved to another price from that of the resistance and support, a flow of activity of transactions will start which will impulse it to a different level of equilibrium. Even those that sold stock at the price of resistance will be willing to buy them again to take advantage of the high gush of that stock. The forming of levels of support and resistance is most likely one of the most noticeable, curious and recurrent events that show up in the study of the graphic prices especially because they are determined in a collective way and are based on subjective beliefs. The rupture of the support or resistance levels can be the trigger for the fundamental changes that can cause expectations very different from those of the investors. Once this comes about, the new expectations will produce new price levels.

Balances of supply and demand
The behavior of the levels of price support or resistance can be found ruled and explained in a common supply and demand graph. This graph will show lines of supply and demand for each level or price that is given. The Supply line will show the amount of stocks that the stock holders are willing to sell at a determined price. For example, when the price goes up, the amount of stock holders that are willing to sell it goes up as well. On the other hand, the Demand line will show the amount of stocks the investors are willing to buy at a determined price. For example, when the price goes up, the number of buyers becomes reduced. For every price level a graph is a good example of how many shares the market wants to buy and how many it wants to sell. The Support level occurs at the price where the supply line cuts the left vertical axis. The price cannot ascend under a certain amount of the stock, since this price may be too low and nobody would be willing to get rid of their stocks. The resistance level occurs at the price where the demand line cuts the left vertical axis. The price of the stock cannot continue going up so much since there will not be any buyers that will be willing to purchase these stocks at such high prices. In a free market, these lines are always changing, according to the expectations of the investors and speculators, as well as the price levels, which should be accepted by the buyers as well as the sellers. A rupture above the level of resistance is evidence of an upward movement of the demand line. In the same way, a break below the support level indicates that the supply line has had a downward movement. Most of the tools of technical analysis are based on the concept of balance of supply and demand. The price series graphs in time provide us with a wonderful panorama of these forces in action.

Beginner Money Investing System of Analysis Directional Movement index Relative Strength Index Stochastic Oscillator Indicator Main Channel of Evolution Support and Resistance Changes of Expectation in Investors and Speculators Tendency Channels About the Bull and Bear Traps Mobile Averages Surrounding Range