Lets say for example, someone was analyzing gold. We know the nominal high for gold right now is 1775. How can traders establish what the future current price levels will be for support or resistance if the commodity has not ever been in that price range? I can understand using previous resistance and support as current resistance/support, but I dont understand the method choosing a resistance level for a price that has not yet occurred.
How did Jim Sinclair know Gold was going to bounce off 1764? Look at today's chart.
They use charts to see where there was resistance - for example, look at this 10 minute chart for gold - you can see that it reached that 1775 level a couple of times and dropped. On the downswing, same for 1720. There is not a whole lot of data there yet, so the more times it happens the "stronger" these points become. Jim - not sure but he may have used some kind of algorithm of some kind for that number, I have no idea. Maybe Fibonacci?
Yea im referring to price levels which have never been touched. Maybe those fibs like you said