Support and resistance describe price levels where an asset has historically had difficulty falling below (support) or rising above (resistance).
Why these levels form
They tend to emerge from clusters of past buying or selling activity. When many participants remember a price level — because a reversal happened there before — their collective behavior can reinforce that level again in the future.
Reading support and resistance
- Support: a level where buying pressure has previously outweighed selling pressure.
- Resistance: a level where selling pressure has previously outweighed buying pressure.
- Breakouts: when price moves decisively through a support or resistance level, it can signal a shift in market sentiment.
- Role reversal: a broken resistance level can subsequently act as support, and vice versa.
Limitations
Support and resistance are not exact lines — they are zones, and they can fail. No technical concept guarantees a specific outcome, which is why risk management remains essential regardless of the analysis technique used.
