Historical highs and lows: references left by the past
The all-time high (ATH), multi-year highs and lows, and the previous week's or month's high and low are reference areas anyone can see on a chart. Price often reacts as it nears them. Above an ATH, though, there is no level where price has traded before.
What are historical highs and lows?
The highest and lowest points price reached over a long period are that period's extremes. The highest price in an asset's whole trading history is called its all-time high (ATH).
These points are easy for anyone looking at the chart to see. So when price comes back to them, attention and orders can cluster there. Like other levels, historical highs and lows are read as a zone rather than a single price.
Which levels count as historical references?
- All-time high (ATH): the zone of the highest price the asset has ever traded at.
- Multi-year highs and lows: highs that have not been cleared and lows that have not been broken for one or more years.
- Periodic highs and lows: the highest and lowest levels of the previous day, week or month.
The longer the period, the more people usually watch its high and low.
Why can behaviour change near an ATH?
Below an ATH there are levels where price has traded before; earlier highs and lows act as references along the way. Above an ATH there is no price history. There is no old zone for price to react to.
Attention then often shifts to the ATH zone itself, to round numbers and to new highs and lows on shorter timeframes. Moves can be faster or more erratic. This does not mean price will keep rising; it only says that there is no old reference overhead.
Three pictures at an ATH zone
When price reaches the zone of the previous high, three different things can follow.
Accepted above the zone
Closes come above the ATH zone and the next candles stay there. The old high zone can later act as support.
Rejected at the zone
Price enters the zone but closes stay below it. Even if a wick clears the old high, without a close beyond it this may be a false breakout.
Sideways around the zone
Price moves back and forth in and around the zone for a while. Neither acceptance nor rejection is clear yet.
What it shows, what it does not prove
What it shows
- The range price has traded in before
- Where the reference areas watched by most of the market sit
- That there is no old price zone above an ATH
What it does not prove
- That price will turn at an old high or low
- That the rise will continue once the ATH is cleared
- That a historical level will always produce a reaction of the same strength
The MarketLevelMap view
How it relates to zones
Historical highs and lows are among the clearest support and resistance zones on a chart. A high that has held for a long time can read as a resistance zone when price nears it again. Once broken, it can act as support on a retest.
It is sounder to read these levels as a band than as a line drawn at a single wick tip. Highs and lows often spread across an area formed by the wicks and bodies of several candles. A breakout is measured by a close beyond the band's far edge.
For general information only. Not investment advice.Last updated: