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Support & Resistance

Understanding the Foundation of Price Action

Support and resistance are two of the most important concepts in technical analysis.
They form the foundation of nearly every successful trading strategy — from breakouts and reversals to trend continuation and risk management.

 

Support and resistance levels help traders identify key price zones where buying or selling repeatedly reacts, giving insight into market psychology and future price movement.

 

What Is Support?

Support is a price level where a stock repeatedly refuses to fall below.
It’s the zone where buyers step in, demand increases, and selling pressure weakens.

 

Support forms when:

  • Buyers absorb selling pressure

  • Price bounces off the same level multiple times

  • Demand increases whenever price dips into the area

When support eventually breaks, it often leads to a sharp sell-off as sellers panic and short sellers pile in.

 

What Is Resistance?

Resistance is the opposite — a price level where a stock consistently fails to move above.
It signals a shortage of buying strength or strong selling interest.

 

Resistance forms when:

  • Sellers overpower buyers at that level

  • Price is rejected multiple times from the same zone

  • Traders take profit near a psychological or historical level

 

When resistance finally breaks, it can trigger a powerful breakout, fueled by:

  • New buyers entering

  • Short sellers forced to cover

  • Momentum traders jumping in

 

Why Support & Resistance Matter

These levels provide:

  • Clear entry zones

  • Logical stop-loss placement

  • High-probability reversal opportunities

  • Breakout/breakdown confirmation

  • Insight into market strength or weakness

They are essential for finding quality setups and avoiding false signals.

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Types of Support & Resistance

Support and resistance come in multiple forms — some static, some dynamic, and some psychological.

 

Static Levels (Fixed Price Points)

These levels do not move with time.

Common static levels include:

  • Historical highs & lows

  • Major swing points from past sessions

  • Psychological round numbers ($10, $50, $100, $1,000)

  • Prior gap zones

  • Volume shelves (high-volume price areas)

Static levels act like “memory zones” where the market

has previously reacted.

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Dynamic Levels (Move with Price)

Dynamic support and resistance shift over time and

adapt to market movement.

Examples include:

  • Moving averages (9 EMA, 20 EMA, 50 EMA, 200 EMA)

  • Trendlines connecting highs or lows

  • Channels (parallel support and resistance)

  • Fibonacci retracements

  • Bollinger Bands

Dynamic levels are especially useful for momentum strategies.

 

Horizontal Levels

Horizontal support/resistance forms when price repeatedly reacts at one clean line.

These zones appear at:

  • Consolidation ranges

  • Double tops/bottoms

  • Previous highs/lows

  • Volume-dense price areas

Horizontal levels are often the strongest because they represent clear rejection zones.

 

Diagonal Levels

Diagonal levels reflect trending markets.

Examples:

  • Ascending trendline (uptrend support)

  • Descending trendline (downtrend resistance)

  • Trend channels

  • Wedges (rising/falling)

Diagonal levels help traders spot breakouts and momentum shifts early.

 

Breakouts & Breakdowns

Support or resistance levels become more powerful the longer they hold.

 

Breakout (Through Resistance)

Happens when buyers finally overpower sellers.
Often leads to strong upward moves.

 

Breakdown (Through Support)

Occurs when sellers overwhelm buyers.
Commonly results in sharp downward momentum.

 

Breakouts and breakdowns are often accompanied by:

  • Increased volume

  • Strong candles

  • Momentum acceleration

These signals help confirm a true move rather than a fakeout.

 

Key Takeaways

  • Support = price floor; Resistance = price ceiling

  • The more touches, the stronger the level

  • Breakouts and breakdowns often lead to major moves

  • Static, dynamic, horizontal, and diagonal levels all work together

  • Combine these levels with volume and trend to improve accuracy

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Pro Tips

  • The more times a level is tested, the more powerful the eventual breakout or breakdown.

  • Use higher timeframe levels (1h, 4h, daily) for stronger setups—they act like magnets.

  • Combine support/resistance with volume: low volume = chop, high volume = true breakout.

  • Support often becomes resistance after a breakdown—and vice versa.

  • Avoid entering trades directly at a level; wait for confirmation or retest.

  • Mark levels pre-market to reduce indecision and improve trade planning.

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