What Are Support and Resistance?

Support and resistance are fundamental concepts in technical analysis. They represent price levels where buying or selling pressure is strong enough to prevent the price from moving further in a given direction.

Support Levels

A support level is a price point where a stock tends to find buying interest as it falls. Think of it as a floor — when the price drops to this level, buyers step in and push it back up.

The more times a support level is tested without breaking, the stronger it becomes.

Resistance Levels

A resistance level is the opposite — it's a ceiling where selling pressure prevents the price from rising further. When a stock approaches this level, sellers tend to take profits.

How to Identify These Levels

Look for areas where the price has repeatedly bounced or reversed. Use tools like:

  • Horizontal lines at previous highs and lows
  • Moving averages (50-day, 200-day)
  • Fibonacci retracement levels
  • Round numbers (psychological levels)

Trading Strategy

Once you identify these levels, you can use them to set entry points, stop losses, and profit targets. Always combine support/resistance analysis with other indicators for confirmation.