SUPPORT AND RESISTANCE

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 SUPPORT and RESISTANCE-

A share value/price will continuously keep changing i.e., by going up and down. While moving up and down there will be values/range of price between which the stock moves and find it difficult to break the range.

Resistance is the upper value/price beyond which it is difficult to move any higher for the stock.

Support is the lower value/price beyond which it is difficult to go any further down for the stock.

 

For example-


In the above figure, we see that the price/candles reached Resistance and Support areas and could not move any further up or down. In the context of charting, we can also say that if we find out the Resistance/Support then we can have an idea about the price movements.

 

Key points about drawing Resistance/Support -

a) Candle Open/Close or Wicks can be joined (minimum 02 points) with each other to find Resistance/Support.

b) A Resistance/Support line can be straight or inclined.

c) We see a group of candles and try to find areas where the candles/price is moving in a range.

d) Then we join the wicks/open/close of the candles and draw the Resistance/Support.


Examples-







In the figures above, we can see that on reaching resistance or support, the price bounced back. If the price breaks the resistance or the support line then we look for break out or break down criterion which helps to take trades.
Break out/break down concepts to be explained in a separate dedicated blog.

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