Support and Resistance

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Support and Resistance are price levels that can help to find trading ranges. Support and Resistance levels, at their core are defined by supply and demand. When demand goes up, buying pressure is up and so is price. When supply goes up, selling pressure is up and price goes down.

Support

In a Bearish Market, a price point where demand is so high that price will not continue to fall past that point would be considered a support level. Support levels are typically below the current price. Keep in mind that a support level is not necessarily set in stone. It is common for a price to briefly break through (or test) the level without making a major decline afterwards. Because of this, some technical analysts use a support zone rather than a specific price level.

Resistance

In a Bullish Market, a price point where supply is so high that price will not break through that point would be considered a resistance level. Resistance levels are typically above the current price. Keep in mind that a resistance level is not necessarily set in stone. It is common for a price to briefly break through (or test) the level without making a major advance afterwards. Because of this, some technical analysts use a support zone rather than a specific price level.

Support/Resistance Switch

It is not uncommon for a support level to eventually become a resistance level, or vice-versa. Once price breaks above a resistance or falls below a support, that level typically reverses its role. In the following example, we clearly see a resistance being broken, and subsequently becoming a support.