Importance of Previous Close price

Generally we avoid to consider previous close price in our future price calculations or while calculating important support/resistance levels either manually or based on software and we will have to pay a lot for this negligence to the market .Future prediction of asset price based on technical indicators involves so many aspects to consider and each and every indicator has its weightage on the other , we are studying that previous close price of the asset class always work as important support /resistance level .

Just see in above chart of MRPL dated 19 Jan 2010 , here a long approximately 4 and ½ hour conflict you may see in bulls and bears to break the level of previous close and finally bears won the race and drag the price from 91 to 86 level .

The other chart of nifty of same date will show you a bouncing from the level as it was a concrete roof and reflected the price line back to the direction from where it was coming :-

In this Nifty chart too you may see a Tug of war from 9 to 10.15 and bears took the lead. After10.30 bulls gathered and tried to lead the index but again at 1.40 the bouncing force from previous close boosted a new energy in bears and pushed the index below 1 % down to previous close.

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