Support and Resistance

Support and Resistance are the two common terms which are related to each and every stock chart. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. And the opposite is true for the Resistance. It is the price level at which selling is thought to be strong enough to prevent the price from rising further. 

Below example shows how to create a support line on the chart.

Resistance Line can also form in the same manner with the straight line indicating the resistance for the stock price at certain level. Support Line and Resistance Line is not always straight as shown above, Support Line and Resistance Line can also form in incline and decline order. Below example shows how to create support Line if the stock is very bullish or bearish. 

Another final way in which Support or Resistance Line can be created is by using the 50 or 20 MA(Moving Average) line. Below example shows how Moving Average worked as a support and resistance for this stock. 

Many times Support Line starts acting as the Resistance Line and Resistance Line as Support Line. Once the stock price breaks and goes above the Resistance Line then that Resistance will start acting as a Support Line for the stock price and vice-verse as well.

Support and Resistance Lines are very common in understanding the charts and the price trend of the stock. It helps understand when is the right price to buy a stock is and when to sell.