Difference of High-Low and Close Prices in Plotting the Lines

I am always asked whether we should consider the line chart (close price) or candlestick chart (high and low prices) to plot the support and resistance lines.

My answer usually is that I consider both. Although it seems high and low prices are more reliable, I still consider the close price when I want to trade the support and resistance breakouts. Sometimes the price reacts precisely to both close and high/low prices. Sometimes it reacts to one of them better and violates the other one. Here I have an example for you.

Below is the CHF/JPY daily chart. The resistance line I have plotted is based on the high price. As you see, candlestick #1 has broken above the line. But the second candlestick has violated the broken resistance that was supposed to work as a support line. Therefore, although the resistance line looks valid, but the market is not 100% loyal to it.

Now, I switch to line chart, plot the resistance line on it, and then switch to candlestick chart again (the below screenshot). As you see, in this case the market has reacted to the broken resistance line precisely:

Candlestick #1, #2 and #3 tested the line and then #4 closed above it. It means candlestick #4 broke above the resistance line. After that, the next candlestick retested the broken resistance line, but this line worked as a strong support and none of the candles have been able to close below it. Therefore, in this case the resistance line which is plotted based on the close price has worked more precisely. That is why I say we should consider both lines (the one plotted based on the line chart and the one which is plotted based on the high/low prices.)

source : fxkeys.com