Support and Resistance Levels

While trend lines are most commonly diagonal, support and resistance tend to be horizontal. Certain psychological levels, such as rounded numbers also act as strong support and resistance.

Support and resistance provide the push and pull that sends prices oscillating back and forth until one or the other breaks.

If it weren’t for support or resistance, trends wouldn’t end, and assets would keep on climbing or falling forever. Support and resistance acts as the gatekeeper to new trading ranges.

A breakdown of support, results in a move to the downside. A break through of resistance, results in follow through and further upside. 

Support and resistance are typically a price level where a larger sized cluster of orders exist. Traders waiting to get orders filled in this area, provide a wall that when momentum hits causes a rejection or reversal.

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