Here, we will discuss support and resistance using tops (resistance) and bottoms (support) as a way of determining market direction.

The first chart we will look at is a daily wheat chart. On the chart shown subsequently the red horizontal lines represent support areas created by bottoms in the daily time frame, and the green horizontal lines represent resistance areas created by tops in the daily time frame.

The rules for this chart are similar to those in my article, "The 1 Point Rule", published on eSignalLearning.com in February 2006 .

On this chart and the one that follows, when the price breaks above a top, it is a potential indication that the market is going higher in the short or long term. When the price breaks below a bottom, it is a potential signal that the market is going lower in the short or long term. As you can see in this chart, the tops and bottoms act as good support and resistance points.

Even if price breaks above or below the first time, the market will often come back to test the tops and bottoms again if it is going higher or lower in the long term.

On the next chart, we can see the same concept at work; only, this time, we've used an intraday chart.

Once again, as you can see, the market tests the tops and bottoms in each time frame before it can go higher or lower in the short or long term.

Also take notice that support and resistance lines created by these tops and bottoms can reverse roles, where a red line that was a support for price moving down now becomes a resistance point for price moving back up.

The same holds true for the resistance lines on the chart. At one point, as price goes up, they are resistance areas, but, as price goes back down, they can become areas of support for the current price action.

These concepts are not necessarily new, but, in trading, a lot can be said for keeping things simple, and it doesn't get much simpler than this.

Best of success in your trading endeavors.

*Reprinted (and modified) with permission from Vincent Troncone. Info@pennies-from-heaven.us www.pennies-from-heaven.us. Futures and options trading involve high risk, and you can lose a lot of money. When investing in futures, you may lose more than your original investment. When purchasing options, you may lose all of the money you invested. According to many experts, most individual investors who trade commodity futures or options lose money. There is a substantial risk of loss in trading futures and options. Do not risk money you cannot afford to lose. Past results are not necessarily indicative of future results. There is no guarantee that the information in "The 1 Point Rule", "Using Tops and Bottoms for Resistance and Support" or "Pennies from Heaven" will generate profits for the reader. All charts are provided by FutureSource.com, a division of eSignal.