Support and Resistance
Support and Resistance levels are important points on the price chart where the forces of supply and demand meet.
These support and resistance levels are viewed by technical analysts as key when finding market psychology and supply and demand.
However, when the support or resistance levels are broken, the supply and demand forces that created these levels are assumed to have shifted.
In other words, new levels of support and resistance will likely be established.
Support is the level at which demand is strong enough to stop price from falling/dropping any further.
In the image above you can see that each time the price reaches the support level, it is unable to break that level.
The rationale is that as the price slides and approaches support, buyers (demand) become more inclined to buy and sellers (supply) become less willing to sell.
Resistance is the level with which supply is strong enough to stop price from moving higher.
In the image above you can see that each time the price reaches the resistance level, it has a hard time moving higher.
The rationale is that as the price rises and approaches resistance, sellers (supply) become more inclined to sell and buyers (demand) become less willing to buy.
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