Support & ResistanceStockCharts.com Definition
Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.
“… where the forces of supply and demand meet.”
OOOH! Skeery!! Sounds so ominous. Kinda gives me the willies.
This is Walter Cronkite. Bearing witness to this gruesome epic battle. Bulls fighting Bears. Its a gory sight indeed. Out gunned and out numbered, the bulls have manage to temporary repel the scourge. Oh!! The filet mignon! And this reporter, here at the 1136 price level, has failed miserably. I brought the grill and the charcoal but I forgot the A1 sauce!! An epic shameful fail indeed. “And that’s the way it is.”
Funny but true. Support and Resistance are price levels are sites of accumulation and distribution. Supports are sites of accumulation. Resistance are sites of distribution. Once support is lost, on the way back up to that price, support becomes resistance. As resistance is passed, resistance becomes support.
SupportStockCharts.com Definition
A price level at which there is sufficient demand for a stock to cause a halt in an downward trend and turn the trend up. Support levels indicate the price at which most investors feel that prices will move higher.
ResistanceStockCharts.com Definition
Resistance is a price level at which there is a large enough supply of a stock available to cause a halt in an upward trend and turn the trend down. Resistance levels indicate the price at which most investors feel that prices will move lower.
I love StockCharts.com‘s consistency in its definitions. Is why I love to reference them.
Support is a “price level at which there is sufficient demand for a stock to cause a halt in downward trend”. Goes well with Accumulation … “…After a decline, a stock may start to base and trade sideways for an extended period. While this base builds…”
Resistance “…is a price level at which there is a large enough supply of a stock available to cause a halt in an upward trend..”. Goes well with Distribution … “…After an advance, a stock may start forming a top and trade sideways for an extended period. … distribution will likely put downward pressure on prices.”
The more a price is level is held as a support or a resistance, the stronger that price level will act as support or resistance. When resistance levels are gained or passed, it allows the price action to move upward. When support levels are lost, it allows for the price to drop further.
In order for the trend to be technically reversed, it must first reclaim the previous support lost. Which is now a resistance. And then reclaim the previous high and overcome the resistance. On the way back down, it will try to go to where it had found support. The price level it acquired to enable it to move up.
Markets move randomly? Its in the chart.