Resistance and support

Module "Advanced Technical Analysis"

It is often said that a security has support at a certain price. This support is nothing more than an imaginary horizontal trend line that has already held several times. The longer the line has held, the less likely it is to break through.

However, if a breakthrough actually occurs, this is a very bad sign. A price often slips to this line all of a sudden, holds for a few days and then rises again. In both cases, you should only act if the breakthrough or hold is clearly confirmed by the further price development.

Conversely, the same applies to the resistance line. This refers to a price level that has been reached several times but has not yet been exceeded. After breaking through the resistance line, there is then some breathing space until the next resistance line.

Supports and resistances are often located at psychologically important price levels, e.g. round numbers. Since the futures exchange has become increasingly important, the corresponding base prices of the options are often the basis of such lines.