Support levels are usually below the current price but it’s not a rare sight to see a stock trade at or around its support. Since technical analysis isn’t a precise science, many times trades can go through at a lower price than support before rebounding.
Support is made once the demand for shares overpowers those that are selling. Many times support is established after a stock’s price bounces at or near a certain price more than once. The most popular moving averages are also used as support, the most used moving averages include the 32-day, 50-day and 200-day.
Resistance and support are essentially the same thing. If the price breaks below a support level, the support can turn into resistance. On the other hand, if the price breaks the resistance, the resistance can turn into support.
Resistance and support levels are key pivot points in a stock’s trading and are regarded as crucial tools to the successful trader. A stock will usually run for higher prices after breaking resistance, but if the resistance is not broken, the stock has strong potential to take a turn towards the downside until its closest support is reached.
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