Resistance and Common Knowledge

I am writing this note on 12th evening and TraderMan's diary entry for 12th October had only three words written in bold letters YES YES YES. I guess he was celebrating the rally in the Nifty and did not bother to write much. It means that I will have to actually write a piece of my own instead of simply copying his diary entries.

The S&P and DAX have rallied strongly and hopefully this will help the Nifty to move above 5200 levels. The area between 5150 and 5200 has acted as a strong resistance in the past and a few people I know are worried about this area acting as a resistance again. But once a resistance level gets well known, I cease to look at that level as very important. If the level is common knowledge then it is difficult to believe that there could be buyers buying today just 1% below those levels if they did not expect those levels to be taken out this time. I would like to believe that these active buyers of today are more likely to be right than those who are passively waiting for the resistance to either sell again or to buy above the resistance.

All that I have written above is not a part of any system of mine but from another time when I too would look at charts, patterns and support/resistance to trade. I have just distilled the knowledge of those times to come to my above inference.

Hallelujah. I can see that TraderMan has updated his diary again so I dont have to write these tiresome notes. He writes

"Dear Diary, had the best time ever. Guess what? I called that friend of mine!!! I am rolling on the floor...sorry I cannot control my mirth. That poor sod is still short. I actually feel sorry for him. He wants to wait for 5150 to be taken out before cutting his short positions. I said what if the Nifty gaps up man? S&P is up 1.5%. He said he does not want to book the loss. Can you believe it? He thinks a MTM loss is not a loss. Only if he books it then it is a loss. I love him. Whenever I am feeling low, I can call him. He is a huge upper"

"After laughing at him so much, I pray that the Nifty will take out 5150-5200 levels. Else this guy will become insufferable"

"As a rule dear diary, I always note down my trading levels before I sleep. I will cut my long Nifty positions and sell short below 4960. This means that I will get out of my long positions at slightly better than breakeven. The short levels for S&P are 1187 and for DAX 5770. I feel good already. I am truly disciplined in my approach to trading"