Support and resistance
Family VI · Charts & indicators
Not to be confused with head and shoulders pattern, resistance level, support level.
Support and resistance are the two sides of the same chart concept: support is a price area where declines have repeatedly stopped, and resistance is a price area where advances have repeatedly stalled. They are drawn from prior highs, lows and consolidation zones rather than calculated from a formula. Because they describe zones rather than exact numbers, they are usually marked as bands on a chart.
How the levels are formed
Support forms when buyers step in at a similar price on more than one occasion, leaving a series of lows at roughly the same level. Resistance forms when sellers appear at a similar price, leaving a series of highs. The more times a level is tested without a decisive break, the more attention it tends to attract.
When a level breaks, its role can reverse: a broken resistance level often becomes support on a later pullback, and a broken support level often becomes resistance. This role reversal is a common feature of trend continuation patterns.
Worked example
Practical points
- Levels are zones, not exact prices; a few ticks of overshoot is normal.
- Higher time frames generally produce more widely observed levels than lower time frames.
- Volume, candle closes and the speed of an approach can affect whether a level holds or breaks.
- Levels are descriptive tools, not guarantees; they can fail without warning.
Often confused with
- head and shoulders pattern
- Support and resistance are horizontal price zones, whereas a head and shoulders pattern is a specific three-peak reversal formation; the visible sign is that head and shoulders has a distinct middle peak higher than two shoulders, not a flat line.
- resistance level
- Resistance is only the upper side of the concept, a price area where advances have stalled; the visible sign is that it sits above the current price, while support sits below.
- support level
- Support is only the lower side of the concept, a price area where declines have stopped; the visible sign is that it sits below the current price, while resistance sits above.
See also
- forex technical analysis indicators
- price action
- fundamental analysis
- technical analysis
- fibonacci
- candlestick