Support and Resistence level

Support Level:

• Definition: A support level is a price level at which a financial instrument (such as a stock, currency pair, or commodity) historically tends to stop falling and may even experience a bounce back.

• Characteristics:

  • Bounce or Reversal: When the price approaches a support level, it may bounce off and start moving higher. This bounce is often attributed to an increased demand for the asset at that particular price point.

  • Turns into Resistance: If a support level is breached, it may act as a resistance level in the future. The logic behind this is that a previous support level may now become a point where sellers come in, expecting the price to fall once again.

Resistance Level:

• Definition: A resistance level is a price point at which a financial instrument historically struggles to move above. It represents a barrier that the price must overcome to continue its upward movement.

• Characteristics:

• Testing and Rejection: The price may approach a resistance level, test it, and then reverse direction. This rejection indicates that there's significant selling pressure at that level.

• Breakout: If the price successfully moves above a resistance level, it may signal a potential continuation of the upward trend. Traders may interpret this as a buying opportunity.

• Support becomes Resistance: Similar to how a support level can become resistance if breached, a resistance level that is broken may act as a support level in the future.