Understanding Support and Resistance – The Building Blocks of Technical Analysis

Overview:

Support and Resistance are basic yet powerful concepts in technical analysis. They act like invisible walls on price charts.

What is Support?

- A price level where demand is strong enough to stop the price from falling further.

- Acts like a floor.

- Buyers step in at this level.

What is Resistance?

- A price level where supply is strong enough to stop the price from rising further.

- Acts like a ceiling.

- Sellers dominate here.

Simple Example:

- If a stock keeps bouncing back from ₹100, that’s a Support.

- If it struggles to cross ₹120, that’s a Resistance.

Why They Matter:

- Help in identifying entry/exit points.

- Basis for setting Stop Loss and Targets.

- Confirm breakout or reversal trades.

How to Identify Them:

- Previous swing highs/lows.

- Psychological levels (₹1000, ₹500, etc.).

- Moving averages and trendlines.