What are support and resistance lines?

Support and resistance lines are technical analysis tools predicting where an asset’s price will tend to stop and reverse. Without breaking through, multiple touches of the resistance area, often accompanied by high volume, denote these levels. The concept of support and resistance is a significant element in technical analysis.

What are support and resistance levels?

Support and resistance levels occur due to large institutions buying and selling securities at their target buy and sell levels. Two things can happen when an asset’s price reaches a support or resistance level. The first is that the price bounces off, or rejects from, the support or resistance area.

What is a resistance line in trading?

Resistance lines are usually drawn on a high-to-low basis. They help estimate resistance and support levels, making them a very useful tool in trading. A resistance line in an uptrend movement marks the support area and a resistance line in a downtrend movement marks the resistance area.

What happens when a price reaches a line of support or resistance?

When the price reaches a line of support or resistance, the price can either bounce off the line or break through it. When the price breaks through, the role of the two lines reverses. If a line supported price, it’s now resistance, and if it was resistance, it’s now support.