Using Machine Learning to Locate Support and Resistance Lines for Stocks

Support and Resistance

Support and Resistance lines are defined as certain levels of the assets price at which the price action may stop and/or reverse due to a larger number of interested investors in those price levels. They could be detected using the stock’s historical data. You could read this article for more information.

Machine Learning

The reason why I decided to use Machine Learning for this process is because it tends to be more appropriate than giving a computer a set of commands to follow using the data and executing it. With Machine Learning, the computer itself utilizes the data in order to recognize correlation and patterns between them. Basically, if you give the computer a series of a stocks data at which the stock price hits a certain level multiple times but tends to get rejected by it, it should be able to classify this pattern. At the same time, we could have two types of these rejections, one as the stock price is moving up and the other as it moves down. One method to solve this is using unsupervised classification.

Unsupervised classification is a type of machine learning that looks for previously undetected patterns in a data set with no pre-existing labels using minimum human supervision. The…