How to trade using support and resistance

Role Reversal
One of the most interesting phenomena regarding support and resistance occurs when the price is finally able to break out and go beyond an identified support or resistance level. When this happens, it is not uncommon to see a previous level of support change its role and become a new area of resistance. As you can see from the chart below, the blue zone represents the price that was able to prop up the price movement at points 1 and 2, but this support turns into resistance once the price falls below it. Points 3 and 4 is the best place to trade as a low risk setup.

The opposite of this process occurs when the price breaks above resistance. As you can see in the chart below, points 1 begin as price barriers, but once the bulls are able push the price above the blue zone, it becomes an area of support. Then price retrace back to RBS zone (as illustrated by points 2) for a test.

How to trade?
In my opinion, this setup is easy to spot on any time frame. Keep in mind, the breakout is required and really important as a trend confirmation. The best place for order entry would be a test of SBR or RBS zone. See the chart below for more detail.

SBR setup

RBS setup