Support and Resistance

Support and resistance are very crucial concepts in the study of technicals.

here in the above image, at the red lines, we can identify support levels and at the yellow lines, we can identify resistance level. They help us to understand the major trend reversals pattern that we will discuss in the future.

Support is the trough or the reaction lows below which price loses its tendency to fall more and tend to rise from that point. Support indicates that buying pressure is greater than selling pressure at that price i.e BUYING PRESSURE > SELLING PRESSURE. If support levels are supported by huge volume then the support level is very significant.

Resistance is the peaks or the reaction highs above which price advance is halted. Resistance indicates that selling pressure is greater than the buying pressure i.e. SELLING PRESSURE > BUYING PRESSURE. If resistance levels are supported by huge volume then the resistance level is very vital.

Significance of support and resistance can be judged by the following reasons-

1)If the trading period is large on support and resistance then such levels are significant.

2) If support and resistance levels are accompanied by huge volume, then such levels are very crucial. 3)If such levels are newly formed, they are more important than the initial ones

Now we can see how we can see in the above image if resistance and support level is broken by price uptrend and downtrend respectively, we can see how the resistance and support level become support and resistance level respectively. this concept will help us to understand that how major trend reversals happen in the market.

It has been seen that mostly these resistance and support levels are round numbers i.e 34,45,56, not at34.34,56.4. That’s why it is always preferable to avoid placing an order at such round numbers.