Technical Analysis: Support and Resistance on Stock Charts

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Support and Resistance are the building blocks needed in order to read chart patterns properly and to trade effectively.

Support:
-A psychological level where people believe the demand is strong enough to hold the stock price up
-This is similar to a price floor, but it isn’t government controlled
-A healthy support line hits multiple points at the same level

Resistance:
-It is the opposite of support
-A psychological level where the sellers are putting the stock down
-When a stock hits the resistance line, buyers no longer want it because the price is too high, and sellers step in
-The more times a stock hits the resistance line, the stronger it is becoming

Support and Resistance are the Same:
-Support is actually resistance and vice versa
-They both equal one another
-i.e. once the stock breaks through the resistance level, the resistance line becomes the support line
-Resistance lines continue to become support lines as the stock continues to go up
-The same is true on the downward level; support lines become resistance lines as the stock goes down
-The more trading that is done in a certain level, the stronger that level becomes

Additional Notes:
-Support and resistance do not have to be horizontal
-They can be elevated at different angles and still be support and resistance lines
-If the support or resistance is broken that means the perception of the stock has changed
-When stocks tank, people are selling their shares and they want less of that stock
-If stocks have a lot of resistance and break through the resistance line, there is a high demand for the stock (new product, positive news, etc)

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