The Power Of Symmetry In Today's Market

August 18, 2016 | Carolyn Boroden

There is a very simple yet powerful tool that I use EVERYDAY in the market. It’s called Symmetry. My definition of symmetry related to the market is similarity or equality when comparing swings in the same direction.

Yesterday provided a great example of how I like to use symmetry to find support and resistance levels. We were able identify the support level that held for the bounce in yesterday’s action in the ES.

We can look at the larger swings going back to the late June lows in the ES. We have had a few small pullbacks. There was a 41-point decline at the end of June, a 39-point decline the first week of July, 24.75 points in mid-July and 36.25 points in the first week of August.

Symmetry In the ES

Using symmetry, those swings can be projected off the recent high. That’s where we can look for our possible support levels. That gave us two areas of possible support for the ES as it sold off the highs from the start of the week.

The smaller pullbacks gave us the area of higher projections. The first one was at 2166. There was also an overlap of an extension of a low-to-high swing and a retracement. That was almost exactly the low of the day as the ES then rallied 16 points into the close.

There are a couple of things to keep in mind when you trade into one of these support zones. First, if you are short, tighten your stops. They are also the areas where you want to look for reversals and any buy triggers.

So keep this simple technique in mind. I find this symmetry every day in the markets. Comparing swings in the same direction can help get you back into the market in the direction of the trend.