Momentum measures how quickly prices move, while resistance identifies price levels where selling pressure halts upward trends. Together, they help traders spot trend continuations, reversals, or weakening trends. But using these tools isn’t straightforward. Traders face challenges like false breakouts, conflicting signals, and weak reversals. This article introduces systematic strategies that combine momentum indicators, like RSI, with resistance levels to improve trade entries and avoid common pitfalls.

Key takeaways:

• False Breakouts: Watch for a candle close above resistance and confirm with volume spikes.
• Weak Reversals: Confirm bounces at support with bullish patterns, RSI signals, and rising volume.
• RSI Strategies: Use RSI < 30 for oversold support reversals or RSI divergence for overbought resistance rejections.
• Breakout Confirmation: Look for strong candle closes, RSI > 50, and volume spikes for reliable breakouts.

Common Problems with Momentum and Resistance

False Breakouts at Resistance

False breakouts happen when prices briefly move above a resistance level but then reverse direction. This usually occurs because there isn’t enough buying strength to sustain the move beyond resistance. Sometimes, institutions intentionally push prices above resistance to trigger stop-loss orders, while fear of missing out (FOMO) causes traders to jump in prematurely. Without strong volume to back the move, these breakouts often fail.

Take, for instance, Tesla (TSLA) in August 2022. The stock price climbed above the $300 resistance level, but without volume confirmation, it quickly reversed and dropped to $220 over the next two months. Another example is the EUR/USD currency pair in May 2023. It briefly surpassed the 1.0800 resistance level, reaching 1.0875, only to reverse and drop to 1.0700.

Justin Bennett, Founder of Daily Price Action, suggests:

The very best way to protect yourself from false breakouts is to wait for a close below or above the support or resistance level respectively.

To avoid getting caught in a false breakout, wait for a candle close on a higher timeframe, such as the 4-hour or daily chart, to confirm the move. Additionally, watch for low or declining volume during a breakout – this is a key red flag for a potential fakeout.

False breakouts can be frustrating at resistance, but traders face similar challenges at support levels.

Weak Reversals at Support

Weak reversals at support occur when prices bounce off the level but lack the momentum to sustain a meaningful move. This often happens when the price approaches support with diminishing momentum, signalling hesitation among buyers. Market indecision, where bulls and bears are evenly balanced, can also lead to short-lived bounces that fail to develop into trends.

Volatility plays a role too. Even if an indicator like the RSI shows an oversold condition, low market volatility – measured by tools like the ATR – may indicate that the bounce lacks the strength to gain traction.

As Forexop explains:

A support or resistance line is where the price is at a temporary equilibrium… it’s a point of ‘possible’ reversal. The word ‘possible’ is the key.

To handle weak reversals, avoid acting on the first touch of support. Instead, confirm the reversal with clear price patterns, such as common candlestick patterns like Pin Bars or Engulfing candles, and ensure momentum indicators like the RSI align with rising ATR and volume. A key signal of a stronger reversal is an increase in volume during the bounce, showing that buyers are actively stepping in to defend the level.

These issues underline the importance of using systematic entry strategies backed by multiple indicators to confirm market moves.

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Entry Strategies Using Momentum and Resistance

RSI for Oversold Reversals at Support

When prices test a support level and the RSI dips below 30, it’s worth waiting for the RSI to climb back above 30. This signals that selling pressure is easing and buyers may be stepping in.

To strengthen your entry, watch for bullish candlestick patterns – like hammers or bullish engulfing candles – forming at the support level. A volume spike alongside these patterns adds confirmation that the market is actively participating. For risk management, you might place your stop-loss 1–2% below the support level. Historically, reversal strategies at support have shown win rates between 60% and 65% with a 1:2 risk-reward ratio. Keep in mind, RSI readings below 30 are relatively rare, occurring only about 9.2% of the time, but they can be highly rewarding when they do.

This same RSI-based technique can also be applied at resistance levels to identify overbought conditions.

RSI Divergence for Overbought Rejections at Resistance

Bearish divergence happens when the price hits a higher high at resistance, but the RSI forms a lower high. This suggests that upward momentum is weakening, despite the price testing resistance. As QuantStock puts it:

RSI divergence occurs when the price and the RSI move in opposite directions, signalling a potential weakening of the current trend and an imminent reversal.

A good entry point for a short position is when the RSI falls back below 70, confirming fading buying pressure. Look for bearish candlestick patterns and a volume spike to validate your entry. For context, a backtest of an RSI divergence strategy on the SPY (S&P 500 ETF) over five years (2018–2023) showed a win rate of 62.1% and a profit factor of 1.68. Adding multiple timeframe analysis – such as using a daily chart for the trend and an hourly chart for entry – can boost win rates by 15–20%.

If divergence doesn’t provide a clear signal, a confirmed breakout can offer a more reliable entry opportunity.

Momentum Breakout Confirmation Beyond Resistance

For breakout trades, wait for a candle to close decisively above a well-established resistance. A strong breakout candle will have a large body and minimal wicks, indicating a clear move. Confirmation comes when the RSI moves above 50, signalling bullish momentum – or above 70 in cases of strong breakout conditions. As Keenbase Trading explains:

In breakout conditions, an RSI above 70 isn’t a sell signal; it’s a dominance signal. It tells you the buyers are in control and staying in control.

A volume spike of 1.5–2.0× the average volume confirms the breakout further. Using an ATR (Average True Range) filter, such as ensuring that Price > Resistance + 1.0×ATR, can help verify that the breakout is meaningful relative to recent volatility. Understanding how to predict market volatility can further refine these entry points. For risk management, consider placing a stop-loss below the breakout candle or the newly established support level. While breakout confirmation strategies typically show win rates between 55% and 60%, they often deliver higher risk-reward ratios, commonly around 1:3. Opening-range breakout systems, on the other hand, can achieve win rates between 78% and 89% with profit factors of up to 1.59.

Comparing Momentum and Resistance Strategies

The performance of trading strategies can vary significantly depending on market conditions. For instance, reversal strategies at support tend to thrive in range-bound or consolidating markets. These strategies leverage oversold conditions near strong support levels to identify potential price reversals. On the other hand, divergence strategies at resistance are useful for spotting weakening momentum at trend extremes, while RSI breakout confirmation works well when price shifts from consolidation to expansion.

Win Rates and Risk-Reward Ratios

Each approach comes with different win rates and risk-reward dynamics. Reversal strategies at support often achieve win rates between 60–65%, paired with a 1:2 risk-reward ratio. Breakout strategies, however, tend to have lower win rates of around 48%, but they compensate with a higher risk-reward ratio of 1:3.

A backtest of Apple Inc. (AAPL) from 2020 to 2023 revealed that a support/resistance bounce strategy achieved a 62.7% win rate and a 1.82 profit factor, performing particularly well during range-bound conditions in Q2 and Q3 of 2021.

Performance Boosters

Incorporating additional elements like volume confirmation can significantly enhance results. For example, in the same AAPL backtest, trades that included volume filters were 11.3% more successful than those without. Additionally, using divergence helped reduce false signals by approximately 40%.

Strategy Comparison Table

Here’s a breakdown of how these strategies compare:

Choosing the Right Strategy

Selecting the right approach depends on the market’s current behaviour. If prices are oscillating between well-defined levels, reversal or divergence strategies are likely to be more effective. However, during periods of high volatility or when prices break out of consolidation, the RSI breakout confirmation strategy becomes a better fit.

Collin Seow Trading Academy: Resources for Systematic Trading

Educational Courses and Free Resources

Collin Seow Trading Academy offers specialised courses designed to help traders master momentum and resistance strategies. For beginners, the Market Timing 101 video course introduces key concepts for recognising market cycles and identifying entry points. Meanwhile, the Systematic Trading Profits course delves into rule-based trading systems that can adapt to various market conditions.

A standout resource is The Systematic Trader Workshop, a free live webinar scheduled for 24 February 2026, limited to 300 participants. This session covers a proprietary 3-step system for accurately determining entry and exit points. Additionally, the academy provides its trading book, The Systematic Trader v.2, which includes technical insights like combining RSI with ATR to filter out false breakouts.

Mentorship and Systematic Trading Methods

The academy goes beyond theory by offering mentorship to help traders refine their systematic trading techniques.

The Systematic Trader Program is designed to eliminate emotional decision-making by focusing on rule-based methods. A key feature of this program is its 3-timeframe rule: identifying the overall trend on a higher timeframe (such as weekly), finding entry signals on the daily chart, and perfecting timing on the 1-hour chart.

Risk management is a cornerstone of the academy’s approach. Traders are taught ATR-based position sizing, which adjusts trade sizes according to market volatility, ensuring consistent risk exposure. This method complements the momentum and resistance strategies taught in the courses. As Brijesh Bhatia, Equity Capital Market Analyst at Definedge, highlights:

Position sizing is essential that holds together a sound trading system.

For continued support, the academy offers direct assistance via email at contact@tradersgps.com and maintains dedicated WhatsApp channels for its alumni network.

Conclusion

Summary of Problems and Solutions

Traders often face challenges like false breakouts and weak reversals, which stem from treating support and resistance as rigid lines rather than flexible zones, and neglecting momentum confirmation. The strategies discussed in this article tackle these issues head-on: using the RSI to detect oversold conditions near support, identifying RSI divergence for overbought rejections at resistance, and confirming breakouts with stronger momentum and volume. As Mind Math Money explains:

Support and resistance are zones (not perfect lines) where price typically reverses due to increased buying or selling pressure.

By combining momentum indicators with support and resistance zones, traders can filter out unreliable signals and improve their timing. Implementing these strategies with discipline can turn market insights into consistent trading results.

Final Thoughts on Systematic Trading

To achieve long-term success, traders need discipline and structure. Relying on intuition often leads to emotional decisions, especially during volatile market conditions. Systematic trading – as opposed to emotional trading – – like the methods taught at Collin Seow Trading Academy – replaces guesswork with clear, rule-based strategies. Bryan Ang, a Financial Expert at Collin Seow Trading Academy, highlights:

The aim isn’t perfection but consistency. When your rules signal action, you act. When they don’t, you wait.

Incorporate the 3-timeframe rule to align trends, entries, and executions effectively. Leverage ATR-based position sizing to dynamically manage risk. Clearly define your entry criteria – such as RSI above 60 for momentum confirmation and increasing ATR to validate volatility – before making any trade.

Whether you’re trading on the SGX or in global markets, these principles focus on delivering consistent, rule-based outcomes. Prioritise high-quality setups where momentum and resistance zones align, instead of reacting to every minor price movement. By following a structured and repeatable process, traders can build the consistency needed for sustainable performance. These methods equip traders in Singapore and beyond to focus on high-probability opportunities.

FAQs

How do I confirm a breakout is real?

To determine if a breakout is genuine, pay attention to increased trading volume, as real breakouts are usually accompanied by higher market activity. You can also use technical indicators or analytical tools to validate the movement. Keep an eye on the price action to see if it sustains momentum – authentic breakouts tend to avoid sudden reversals or fakeouts. For extra confidence, watch for a retest of the breakout level, which can provide further assurance that the signal is dependable.

What timeframe should I use for entries?

Shorter timeframes like 1-minute, 5-minute, or 15-minute charts are ideal for identifying entry points. These charts let you track quick momentum changes and spot the best opportunities in fast-moving markets. They’re especially useful for reacting promptly to price shifts and making well-timed decisions.

Where should my stop-loss go around support or resistance?

When setting a stop-loss, it’s smart to position it close to support levels. Why? If the price falls below these levels, it could indicate a potential trend reversal or a dip in demand. This makes support zones a practical reference point for managing risk and protecting your investment.