Support and resistance are the foundation of technical analysis. These price levels represent areas where buying or selling pressure has historically been strong enough to stop price movement.
What is Support?
Support is a price level where buying interest is strong enough to overcome selling pressure. When price approaches support: - Buyers see value and step in - Sellers may hesitate - Price tends to bounce
What is Resistance?
Resistance is where selling pressure overcomes buying interest. When price approaches resistance: - Sellers take profits or initiate shorts - Buyers may hesitate - Price tends to pull back
How to Identify Key Levels
1. Previous Highs and Lows The most obvious levels are previous swing highs and swing lows. These are prices where the market has already shown it reacts.
2. Round Numbers Psychological levels like $50, $100, $500 often act as support or resistance because traders place orders at these prices.
3. Gaps Price gaps often get "filled" later, meaning the edges of gaps act as magnets and potential support/resistance.
4. High Volume Areas Prices where large amounts traded often become important levels. You can see these on volume profile charts.
5. Moving Averages The 50, 100, and 200-day moving averages often act as dynamic support and resistance.
Trading Support and Resistance
**At support**: traders look for long setups with stops below the level **At resistance**: traders look for short setups with stops above the level **On breaks**: Trade in the direction of the break with volume confirmation
Role Reversal
An important concept: when support breaks, it often becomes resistance (and vice versa). This "role reversal" is key to understanding price action.
Check Your Levels with Wyck
Upload a chart screenshot and Wyck reads the support and resistance levels, with actual prices when the price axis is readable, and marks them on your chart. Compare them with the levels you drew.