Support and Resistance

Support and Resistance are 2 basic elements you need to know for successful stock chart analysis. Learn how to identify key support and resistance levels and you will know enough to create great stock trading system.

Support is important price level where demand starts to rise so much that prevents price from further decline. It is level, where buyers go into action and start buying.

Resistance is price level where supply begins to be so high that stops price from further growth. It is level where sellers find price so attractive that they are heavy selling.

How do you find these levels?
Not by any special stock chart custom indicator. You will use simply one of these techniques to identify these important levels

• Horizontal price level
• Trendline
• Moving average
• Retracement level

Horizontal price level is most common type of support or resistance. You can identify it on chart simply by looking into history and finding level where stock stop its important moves. You can see example on this chart:

! My stock market chart tips:

1. Draw horizontal lines (as you can see on chart) to visualize important Support and Resistance levels


2. Horizontal level is much more price zone then simply one price


3. You can find short body candlesticks, doji candlestick or hammer candlestick on these levels.

Strength of these levels

When you will be looking at candlestick chart you will define basic period of candlesticks. As you can see on chart above, basic period is daily. That means that every candlestick represents one day. But you can define also different periods: weekly, hourly, 30 minutes and so. And you will find support and resistance levels on each type of chart.

So you have to recognize levels which are more important then others. But again it is very simple. Levels from weekly chart are more important then levels from daily chart and these are more important then levels from 15 minutes chart.

Every of these levels can be broken

Nothing is forever. The same is with support and resistance. So every of these level could be broken. And such break is very powerful opportunity for stock trade.

Remember this simple but very important rule:

• Broken resistance is now new support level
• Broken support is new resistance level

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