Support and Resistance

Support and Resistance are fundamental concepts in technical analysis used in trading and investing. These levels represent areas on a price chart where movements of an asset are expected to encounter significant obstacles.

• Support:
  • The support level is a price or zone on a chart where demand is expected to be strong enough to halt or reverse a downtrend.
  • It acts like a “floor” on the chart, where the price tends to bounce upwards. Investors view the support level as a good point to buy, as they expect prices to rise from that point.

• Resistance:
  • The resistance level is a price or zone on a chart where supply is expected to be strong enough to halt or reverse an uptrend.
  • It acts like a “ceiling” on the chart, where the price tends to pull back. Investors view the resistance level as a good point to sell, as they expect prices to fall from that point.

The concept of support and resistance is based on the idea that investors remember and react to historical price levels. When the price approaches a support or resistance level, significant events such as pullbacks, breakouts, or consolidations are likely to occur.