Technical analysis
Support and resistance are the most fundamental ideas in technical analysis. Every pattern and many entry or exit decisions ultimately refer back to where price has repeatedly stalled or reversed. If you can identify those zones, you already have half of the context for a trade idea.
Support is a price area where buying pressure tends to exceed selling pressure. Think of it as a floor: when price reaches it, buyers step in because they see value. The result is often a bounce.
A support level tends to be stronger when:
Resistance is the mirror image: an area where selling pressure tends to exceed buying pressure — a ceiling. Sellers appear to take profits or short; price often rolls over.
Resistance is stronger under the same logic: more touches, meaningful volume at the zone, and persistence over time.
The most direct approach: mark where price reversed before. A prior swing low that held becomes support; a prior swing high that capped price becomes resistance. More tests usually mean more significance — but also a higher chance of eventual failure once liquidity shifts.
Prices often hesitate near round figures such as $50, $100, or $200 because many orders cluster there. A stock approaching $200 may meet a wall of limit sells at that level — creating visible resistance until absorbed.
The 50-day and 200-day moving averages behave like dynamic support and resistance. In an uptrend, the 50-day MA often attracts dip buyers; in a downtrend, the same line can cap relief rallies. They are not magic — price can overshoot — but they are widely watched.
Areas where a lot of shares changed hands over time often act as magnets. If a stock built positions between $45 and $47 for weeks, participants have memory at that range — it may attract price back as support or resistance when revisited.
When a support level breaks, it often becomes resistance on the next retest — and the opposite after a resistance breakout. Traders who bought at $50 and are underwater may sell at breakeven when price returns, supplying the level from above.
This flip idea underpins double tops, double bottoms, and head-and-shoulders — the level’s meaning changes once the market has voted with a clean break and follow-through.
In a range, consider buying near support with a stop just below the zone and targeting the next resistance above — and the mirror for shorts at resistance. Pair the touch with a confirming candle (see our candlestick guide).
When price clears resistance on strong volume, continuation is more likely. A common plan: enter on the break, place a stop under the former resistance (now support), and project a measured move from the prior range height.
After a breakout, price often retests the old boundary. That pullback can offer a tighter stop and better risk-reward than chasing the initial spike — wait for rejection or confirmation at the retest.
Start on the daily chart: pick the strongest 2–3 support and resistance zones with multiple touches and clear stories. Watch how price approaches them with volume and candlestick context. Layer risk management on every idea — levels raise probability, they do not guarantee outcomes.
Educational content only. Not investment advice. Trading involves substantial risk of loss.