Trends, Support, and Resistance
How to define a trend objectively, and why support and resistance are about crowd memory, not fixed lines.
Murphy defines an uptrend concretely as a series of successively higher highs and higher lows, and a downtrend as the mirror image — successively lower highs and lower lows — deliberately giving traders an objective test rather than a purely visual impression. A trendline is then drawn by connecting at least two of the relevant swing points (lows in an uptrend, highs in a downtrend), and the book stresses that a line touched only twice is tentative — it takes a third touch that holds to meaningfully validate a trendline as a level other market participants are actually respecting, not just a line one trader happened to draw.
Support and resistance are introduced as the same underlying phenomenon viewed from opposite directions: support is a price level where past buying was strong enough to halt or reverse a decline, resistance is a level where past selling halted or reversed an advance. Murphy's explanation for why these levels keep working is behavioral rather than mechanical — traders who bought near a prior low and regret not buying more tend to buy again if price returns there; traders who sold too early near a prior high tend to sell again if given a second chance at that price. This is also why a broken support level tends to become new resistance, and vice versa: the population of traders with regret at that price simply flips from "wish I'd bought more" to "wish I'd sold there."
| Situation | What it suggests |
|---|---|
| Price respects a trendline on a third touch | The line reflects a level other participants are genuinely defending |
| A brief, low-volume poke through a trendline | More likely noise than a genuine trend change |
| A decisive, higher-volume close through a trendline | A more credible signal the trend has actually shifted |
| Old support broken decisively | That level is a candidate to act as new resistance on a retest |
A common misreading Murphy warns against is treating support and resistance as precise, single price points. Because the levels reflect the collective memory and regret of many different traders who each entered at slightly different prices near the same area, real support and resistance behave more like zones than exact lines — expecting a bounce at exactly one specific price, rather than somewhere in the surrounding zone, sets up unrealistic expectations and premature conclusions that a level has "failed" when price merely tested the edge of the zone rather than its precise center.
- An uptrend is objectively a series of higher highs and higher lows; a downtrend is the mirror image — this gives trend identification a concrete test, not just a visual impression.
- A trendline needs a third touch that holds to be considered validated, not just the two points used to draw it.
- Support and resistance flip roles once decisively broken, because the traders holding regret at that price flip from one side to the other.
- Support and resistance are better understood as zones than exact price lines.