Support and Resistance
Support and resistance are price levels where a stock has repeatedly stopped falling or rising. They are the backbone of technical analysis and help you decide where to enter, exit and place a stop-loss.
What is support?
Support is a price level where buying has repeatedly stopped a decline. Buyers see value there, so demand outweighs supply and price tends to bounce.
What is resistance?
Resistance is a price level where selling has repeatedly stopped a rally. Sellers take profits or see the price as too high, so supply outweighs demand and price tends to turn down.
How to draw support and resistance
- 1Open a daily chart covering several months.
- 2Find clear swing highs and swing lows where price turned.
- 3Draw horizontal lines through areas price has touched several times.
- 4Treat each line as a zone, not an exact price.
- 5Keep only the most important levels; fewer lines are clearer.
Types of support and resistance
| Type | Example |
|---|---|
| Horizontal levels | Previous swing highs and lows |
| Trendlines | A rising line under higher lows, or a falling line over lower highs |
| Moving averages | The 50-day or 200-day moving average acting as dynamic support |
| Round numbers | Psychological prices such as 100 or 1,000 |
| 52-week high and low | Yearly extremes that many traders watch |
Role reversal
When resistance is broken, it often becomes new support; when support is broken, it often becomes new resistance. A breakout followed by a successful retest of the old level is one of the most popular setups.
Trading strategies
- Bounce: buy near support in an uptrend, with a stop just below the zone
- Breakout: buy when price closes above resistance on strong volume
- Retest: wait for a broken level to be retested before entering
- Range: in sideways markets, buy near support and sell near resistance
Common mistakes
- Treating levels as exact prices instead of zones
- Drawing too many lines
- Trading breakouts without volume confirmation
- Ignoring the bigger trend
Tools to help
Find stocks near their yearly levels and calculate levels quickly.
Frequently asked questions
What is support and resistance in simple words?
Support is a price level where a falling stock tends to stop and bounce; resistance is a level where a rising stock tends to stop and turn down.
How do you find strong support and resistance levels?
Look for levels that price has touched several times, especially on higher timeframes like the daily or weekly chart, and that line up with round numbers or moving averages.
What happens when support is broken?
A clear break below support often leads to further selling, and the old support level frequently becomes new resistance.
Which timeframe is best for support and resistance?
Levels on daily and weekly charts are generally more reliable than those on short intraday charts.
Educational information only, not investment advice. Market data may be delayed.
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