Resistance level
Family VI · Charts & indicators
Not to be confused with support and resistance, support level, level 2.
Resistance level is a horizontal price area on a chart where selling pressure has historically overcome buying pressure, preventing the price from rising further. It is identified by multiple price highs clustered around the same level. Unlike a single high, a resistance level gains significance from repeated tests.
How resistance forms and is identified
Resistance emerges when traders who bought at higher prices sell to break even, or when short sellers enter at a perceived overvaluation. On a price chart, it appears as a ceiling: two or more highs at approximately the same price, often with wicks or shadows touching the level. The more times the price fails to break through, the stronger the resistance is considered. Volume can confirm the level if selling volume spikes on tests.
Worked example
Role reversal and false breaks
When price closes decisively above resistance, that level often becomes new support. A brief intraday move above resistance that closes back below is a false breakout, reinforcing the level. Traders watch for a close beyond the level, not just a wick, to confirm a breakout.
Often confused with
- support and resistance
- Support and resistance is the paired concept of both floors and ceilings, whereas resistance level refers only to the ceiling; the visible sign is that support and resistance includes both lower and upper boundaries on a chart.
- support level
- A support level is a price floor where buying emerges to halt declines, while a resistance level is a price ceiling where selling emerges to halt advances; the visible sign is that support sits below the current price and resistance sits above it.
- level 2
- Level 2 is a market data feed that shows the best bid and ask prices alongside the aggregated or individual orders queued at each price, rather than only the top of book.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- support and resistance
- technical analysis
- fibonacci