Supports are the price levels where a declining stock taking pause from decline or taking a temporary bounce from that level. Resistances are the price levels from where a rallying stock temporarily pause its up move or taking a downside move from that level.
These supports and resistances play a crucial role in analyzing a stock’s price Movement. A valid support would turn into a valid resistance once the stock crosses that support. Likewise a valid resistance would turn into a valid support once the stock crosses that resistance.
The supports and resistances work because that particular price level is being registered in the minds of the majority number of the market participants. Majority number of Market participants register that particular price level because of that level being a important level like, twice from the low, thrice from the low, half from the highs, one third from the highs, Fibonacci numbers, Gann numbers, and etc.
So in a rally, as the crucial levels approach, Market participants aware of that level and they try to exit their buy positions before that level is touched. As more number of Market participants do that, a temporary sell off is taking place at the particular level. The point here is that the majority of the participants should look for that particular level. If only a minority thinks about it, then it is not a valid resistance.
The same thing happens during the supports also. Identifying the crucial supports and resistances are important in improving the trading and analyzing skills.
Below I have given a sample of Supports and Resistances.
