What is Support and Resistance?
Support is a price level where buying pressure tends to prevent further decline. Resistance is a price level where selling pressure tends to prevent further advance. Together they form the boundaries of a trading range.
Support and Resistance Explained
Support and resistance levels are foundational to technical analysis. They represent psychological price points where supply and demand shift. Support forms where buyers consistently step in. Resistance forms where sellers consistently emerge. When support breaks, it often becomes resistance, and vice versa.
Real-World Example
A stock has bounced off $50 three times in the past month — that's support. It has been rejected at $60 twice — that's resistance. Traders might buy near $50 and sell near $60 until one of these levels breaks.
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