Support and Resistance Levels

Support and Resistance are price levels at which movement should stop and reverse direction. Think of support/resistance (S/R) as levels that act as a floor or a ceiling to future price movements.

Support - A price level below the current market price, at which buying interest should be able to overcome selling pressure and thus keep the price from going any lower.

Resistance - A price level above the current market price, at which selling pressure should be strong enough to overcome buying pressure and thus keep the price from going any higher.

One of two things can happen when a Stock price approaches a support/resistance level. On the one hand, it can act as a reversal point. On the other hand, support/resistance levels may reverse roles once they are penetrated. For example, when the market price falls below a support level, that former support level will then become a resistance level when the market later trades back up to that level.

 


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