Support and Resistance

• Support is the case of a declining trend that can be expected to halt temporarily due to a concentration of demand.
• Resistance is the case in which an advancing trend can be expected to halt temporarily due to a concentration of supply.
• The more times it bounces to the support level, the greater the importance. Every time the price falls to the support level, buyers become more enthusiastic than sellers, because they thing the security in question is a bargain.
• What becomes support on the way down, turns out to be a resistance on the way up.

How to determine the significance of Support or Resistance areas:

• The more times a zone has been able to halt or reverse a price trend, the greater its significance.
  • If the price keeps bouncing off a support level, people get used to the idea. When it is finally breached, those who have become accustomed to buying there and selling at a profit are forced to sell at a loss.
• The steeper the price move preceding a given support or resistance zone, the greater its significance.
• The more a security changes hands at a particular level, the more significant that level is likely to be as a support / resistance zone.