stock market is a Non Linear,COMPLEX,Dynamic system

How to identify significant support resistance levels?
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you have many different approaches to identify support and resistance levels in the market, but a great number of them are most unreliable.

These approaches include, but are not limited to methodologies that utilize Fibonnacci numbers and ratios, trend lines, moving averages or Gann concepts.

Those techniques have a static view of the market.

Those approaches assume that the market will repeat its past behavior and experience in the same exact manner and can therefore be viewed with a linearly. They also bear fixed intervals for inputs which creates yet another problem.

The market is not a static phenomenon and we cannot expect the market to disregard all the changes of economic and industrial Macroforces that constantly exert pressure on price movements.

The market is most Complex and Dynamic phenomenon - but it is clear that price fluctuates between levels of support and resistance. How can we identify these levels in advance and not in hindsight?
Let us see what levels of support and resistance are the most critical and how we as traders can identify them.
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The factors governing support resistance levels are

Psychology of participants
Fair Represantation of market participants
Finding common number for price for effective trading entry
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FAIR REPRESENTATION
Looking at the Market Participant’s Universe, we are able to identify fair representations for all segments of the market.
One way of segmenting the participant’s Universe is to use the Time Frame aspect. Since traders employ charts with specific time frames such as 5 minute or 15 minute bars, their particular levels of pleasure and pain (profit or loss) are represented on the simple bar chart. Therefore, our task is to identify the price chart time frames that most fairly represent the majority of market participants.
In the case of the S&P market, since such a high percentage of players are day traders, intraday charts will be sufficient for obtaining our information. For other financial markets or physical commodities, an understanding of the market dynamics is essential when trying to select the proper time frame to observe. Testing, research and examination are crucial when trying to select the proper time frame to employ. Based on Mr Gandevani"s research of the S&P market, he found the 1, 10, 30 and 45 minute charts as well as the Daily chart to be a fair representation of the participants.

Note that a chart like the 10 minute time frame encompasses the price patterns of the 5, 7, 15, etc. so that each time frame listed includes a variety of different participants.

Now that we have identified a fair representative of the Market Participant’s Universe, we can identify support and resistance for each particular time frame chart and then find the Common denominators among the values recorded. Since a level of support or resistance is merely a price level in the market, we can therefore refer to it as a Common Number. Following is a Flow Chart to help you in identifying Common Numbers for the market of your choice. Please remember that the quantity of Common Numbers uncovered has a direct relation to the market’s internal dynamics. For example, when day trading the S&P market, most of the time four numbers are required to properly identify the most important support and resistance levels. (ie. 10, 30,45 and 60 minute charts )
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The process involved is
1)Study the selected Market Participants Universe.

2)Identify the fair representations of those participants, by dissecting your Universe into segments that trade on various time-frame charts.

3)Identify support and resistance levels in each chart.

4)Find the common denominators among those levels
COMMON NUMBERS FOR EFFECTIVE TRADING
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Depending upon the dynamics of a particular market, it’s possible to derive a number of Common Numbers.
Each market’s dynamics will dictate a specific relationship between its Common Numbers, which will in turn limit their appearances within the context of intraday market extensions.

We can therefore use Common Numbers to help locate better entry and exit levels for our trades.

Entry Points
You can identify a Common Number (CN) to enter the market, as price approaches the CN. This would result in a high probability of good entry with regards to price and time. Additionally, you might want to employ some type of dynamic indicator or particular price pattern to filter market noise from the CN level.











Please refer the great research article by By Ned Gandevani,
http://www.winningedgesystem.com/articles/article3.htm