Reading Stock Charts: Support and Resistance
Learn to identify key support and resistance levels on charts to make better entry and exit decisions.
💡 Key Takeaways
- ✓Support = floor where buyers step in
- ✓Resistance = ceiling where sellers emerge
- ✓Broken levels can reverse their role
- ✓Use these levels for entries and exits
Support is a price level where a stock tends to stop falling and may bounce higher. It represents a concentration of buyers.
Resistance is a price level where a stock tends to stop rising and may pull back. It represents a concentration of sellers.
These levels form because traders remember previous price points and act on them. Round numbers often act as psychological support/resistance.
When support breaks, it often becomes resistance. When resistance breaks, it often becomes support. This is called role reversal.
Use support and resistance to set entry points, stop losses, and profit targets. The more times a level is tested, the more significant it becomes.
Summary
- 1Support = floor where buyers step in
- 2Resistance = ceiling where sellers emerge
- 3Broken levels can reverse their role
- 4Use these levels for entries and exits
📖 Recommended Reading
Want to dive deeper into this topic? Check out our recommended book to master these concepts.
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Disclaimer: This content is for educational purposes only and should not be considered financial advice. Always do your own research and consult with a qualified professional before making investment decisions.
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