Support level
Family VI · Charts & indicators
Not to be confused with support and resistance, resistance level, level 2.
Support level is a horizontal or near-horizontal price zone drawn on a chart at a level where the market has repeatedly stopped falling and rebounded. It is identified by observing past price action: a level becomes support when several lows cluster around the same price and each is followed by a rally. Support is a descriptive label for a historical pattern, not a guarantee that the price will stop there again.
How a support level forms
Support forms when demand at a particular price is sufficient to absorb the supply being sold into it. Common causes include limit buy orders resting at a round number, buyers who missed an earlier move entering on a pullback, or short sellers covering positions near a prior low.
On a chart, support is usually drawn as a zone rather than a single line, because lows rarely print at exactly the same price. A level that has held on three or more separate occasions is generally treated as more significant than one that has held only once.
Worked example
The three lows sit within a 0.20 range, so the support zone is drawn around 48.00. A later close below 47.90 would suggest the level has failed.
Role reversal and failure
When price closes decisively below a support level, that level often becomes a resistance level on subsequent rallies, a behaviour known as role reversal. The strength of a support level is judged by how much volume accompanied the rebounds from it and how far price travelled away before returning.
Support levels are not predictive certainties. They describe where buyers have previously been active, and price can break through them when selling pressure increases.
Often confused with
- support and resistance
- Support and resistance is the paired concept covering both floors and ceilings, whereas a support level is only the floor; the visible sign is that support and resistance appears as two opposing lines or zones on the same chart.
- resistance level
- A resistance level is a price zone where rallies have previously stalled, the mirror image of support; the visible sign is that resistance sits above the current price while support sits below 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