Support and Resistance

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

Resistance is the price level where supply begins to be so high that it stops the price from further growth. It’s the level where sellers find the price so attractive that they sell heavily.

How do you find these levels?
There’s no special stock chart custom indicator. You use one of these simple techniques to identify these important levels.

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

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

! My stock market chart tips:

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


2. A horizontal level is much more a price zone than simply one price.


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

Strength of these levels

When you look at a candlestick chart, you can define the basic period of candlesticks. As you can see on chart above, the basic period is daily. That means that every candlestick represents one day. But you can define different periods also: 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 that are more important than others, but again it’s very simple. Levels from a weekly chart are more important than levels from a daily chart, and these are more important than levels from a 15-minute chart.

Every one of these levels can be broken

Nothing is forever. The same is with support and resistance. So, every one of these levels can be broken. And such a break is a very powerful opportunity for a stock trade.

Remember, these simple but very important rules:

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

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