Support and Resistance

What are support and resistance

Support and resistance are key concepts in technical analysis that denote price levels at which the price of an asset tends to stop or reverse direction.

• Support is the level at which buyers enter the market and prevent further price declines.
• Resistance is the level at which sellers enter the market and prevent further price increases.

How support works

Support acts as a price "floor". When the price falls to the support level, it often bounces upward due to increased demand. However, if support is broken, it can become a new level of resistance.

How resistance works

Resistance acts as a price "ceiling". When the price reaches this level, it often reverses downward due to increased selling. If resistance is broken, it can become new support.

Importance for investors

• Helps identify suitable entry and exit points.
• Serves as a basis for setting stop-loss and take-profit levels.
• Allows investors to estimate the likelihood of future price movements.

Support and resistance on Stonkee

On Stonkee support and resistance are automatically detected using algorithms that analyze historical price charts and trading volumes. Users can see these levels directly on the charts of selected stocks and use them when building trading strategies.

Summary

Support and resistance are essential tools in technical analysis that help investors better understand price movements and improve the timing of their trades.