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2005issue C071-5

A tape-reading case study of support, resistance, and breakout confirmation

Tape reading in this case study uses time-and-sales and inside bid-ask size to see who is taking the inside market. Repeated failure to clear a large resting bid or offer is then read as support or resistance, and taking the last remaining size is the breakout confirmation hypothesis. A ten-session tape-only drill is used to check those same-session reads.

  • Tape reading uses time-and-sales and inside bid-ask size as the primary order-flow sources and treats market-depth books as nonessential.
  • Color on the tape is treated as a weak control signal unless size agrees. Large executed buys plus large bids are what mark a tape as bullish.
  • Repeated inability to clear a large resting offer or bid is read as resistance or support. Wearing that size down and taking the last remaining share is the breakout or breakdown hypothesis.
  • A single tape turn is treated as very short-lived. A tradable trend is inferred only when buying or selling pressure recurs across a longer watch window.
Entries in this reading3 entries
Current trackTape reading21 readingsBreakout confirmation205 readingsSupport and resistance227 readings

How the tape is read

Tape reading uses time-and-sales and inside bid-ask size as the primary order-flow sources. Market-depth books are treated as nonessential because they are not mainly about prints at the current price.

A time-and-sales color scheme can separate buys at the ask, sells at the bid, new inside bids, new inside asks, and new highs or lows of the day.

When buyers or sellers take control

A shift from a mixed tape to a run of new bids and trades at the ask is framed as buyers taking control and a near-term rise. A shift to new asks and trades at the bid is framed as sellers taking control and a near-term decline.

Color signals are treated as weaker without size. Large executed buys plus large bids are what mark a tape as bullish, as in the Cisco example.

A mixed close on QLogic

In the QLogic tape near the June 10, 2004 close, neither color dominated. More prints were buys, but displayed size on the ask exceeded size on the bid, so the tape was read as neutral.

Support, resistance, and breakout confirmation

Repeated inability to clear a large resting offer is read as resistance. Repeated inability to clear a large resting bid is read as support.

A breakout or breakdown is hypothesized when that same large offer or bid is worn down print by print and the last remaining size is taken, with the immediate next quote expected to step to the adjacent tick. That last-share take is the breakout confirmation read.

Recurrence and a ten-session drill

Single tape turns are treated as very short-lived. A tradable trend is inferred only when buying or selling pressure recurs across a longer watch window rather than appearing once.

A ten-session drill watches one liquid, volatile name on tape only, twice daily from 9:30 to 10:30 and 14:30 to 15:30 Eastern, logging expected turning prices, later stall prices, and session results so the same support, resistance, and breakout confirmation reads can be checked.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
9 of 20 in the Tape reading track
20051-1 pp.Next on Tape readingTape flips versus idle capital: a process critiqueA constructive economic month still needs a decision rule, because a soft 10-year yield can leave the story unfinished.
All readings on this track · 20 readings
  1. 1986Open outcry hand signals as order routing
  2. 1989Finishing a market order in a first index-pit session
  3. 2001Ticket charges, internalization, and hidden size on the tape
  4. 2003Opening auction indications, premium and print size
  5. 2003Listed open order routing and the short-sale tape
  6. 2003Opening indication, one-sided envelope, and the sector tape check
  7. 2003Opening auction fills and the post-print tape
  8. 2004Specialist prints, opening exits and live tape filters
  9. 2005A tape-reading case study of support, resistance, and breakout confirmation
  10. 2005Tape flips versus idle capital: a process critique
  11. 2005Read the tape, name the liquidity job, then route for price
  12. 2006Fill entitlement, hybrid routing, and pairs sequencing
  13. 2006Alerts over resting stops, with tape-reading at the exit
  14. 2006When crowd levels diverge from Fibonacci support
  15. 2008Perfect prints before the chart
  16. 2008Hidden size, tape delay, and pairs shorts belong in the trade rule
  17. 2010Inside the spread: why OHLC bars hide the buy-sell shift
  18. 2010Specialist pair books sized for dividends and tape
  19. 2016Tape reading as judgment under distraction
  20. 2018Tape-reading breakouts with increment stops
By fieldAuction and volume75 readingsBy year2005167 readings
All 21 readings tagged Tape reading
Also on Tape reading5 readings
2018Tape-reading breakouts with increment stops2006When crowd levels diverge from Fibonacci support1986Open outcry hand signals as order routing1989Finishing a market order in a first index-pit session2001Ticket charges, internalization, and hidden size on the tape