Stock Market 101: Support Levels and Resistance Levels

Overview: Today's post will be a little different than usual. There will be a section all about Support and a section all about Resistance.

Support:

Support, or a support level, refers to the price level that an asset does not fall below for period of time. This is generally where many traders and investors try to buy a stock. The support level is easy to draw and even easier to visualize. The support line can be visualized by simply drawing a line along the lowest low points for the time period being considered. In general finance terms, support level is the level at which buyers tend to purchase or enter into a stock. It refers to the stock share price that a company rarely goes below. When a price of stock falls towards its support level, the support level holds and is confirmed, or the stock continues to decline and the previously demonstrated support level must change to incorporate the new lows. Support levels in stocks can be created by limit orders or simply the market action of traders and investors.

Resistance:

Resistance, or a resistance level, refers to the price level that an asset is the price at which the the price of an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price. Resistance levels can be short-lived if new information comes to light that changes the overall market’s attitude toward the asset, or they can be long-lasting. In terms of technical analysis, the simple resistance level can be charted by drawing a line along the highest high points for the time period being considered. The resistance level is where most traders generally set limit orders to sell or directly sell their stocks because the stock is not expected to go much higher.

Key Takeaways:

1) The support level represents a price point that an asset struggles to fall below over a given time period. 2) Support levels can be visualized using different technical indicators or simply by drawing a line connecting the lowest lows for the period.

3) A resistance level represents a price point that an asset has had trouble exceeding in the time period being considered. 4) Resistance can visualized using different technical indicators rather than simply drawing a line connecting highs.