Support and Resistance: The Backbone of Technical Analysis
Identify where prices are likely to pause, reverse, or accelerate using support and resistance levels.
💡 Key Takeaways
- ✓Support has buyers, resistance has sellers
- ✓More tests = more significant level
- ✓Broken resistance becomes support
- ✓Round numbers are psychological levels
Support is a price level where buying pressure historically overcame selling. Stocks tend to bounce at support as buyers step in.
Resistance is a price level where selling historically overcame buying. Stocks struggle to break above resistance as sellers appear.
The more times a level is tested, the more significant it becomes. A support level tested five times is more reliable than one tested twice.
When price breaks through resistance, that level often becomes new support — and vice versa. This role reversal is a key concept.
Round numbers (50, 100, 200, etc.) often act as psychological support/resistance because many traders set orders at these levels.
Summary
- 1Support has buyers, resistance has sellers
- 2More tests = more significant level
- 3Broken resistance becomes support
- 4Round numbers are psychological levels
📖 Recommended Reading
Want to dive deeper into this topic? Check out our recommended book to master these concepts.
View on AmazonAs an Amazon Associate, we earn from qualifying purchases at no extra cost to you.
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.
Continue Learning
Reading Stock Charts: Support and Resistance
Learn to identify key support and resistance levels on charts to make better entry and exit decisions.
Candlestick Patterns Every Trader Should Know
Learn to read candlestick charts and identify key reversal and continuation patterns.
Moving Averages: The Foundation of Trend Analysis
Master simple and exponential moving averages to identify trends and trading signals.