Resistance Level/Line/Point

• Resistance level is a price point on the chart where traders expect maximum supply (in terms of selling) for the stock/index.
• Resistance level is always above the current market price.
• Resistance level often acts as a trigger to SELL.

Target for a long trade = Resistance Point

Support Level/Line/Point

• Support level is a price point on the chart where the trader expects maximum demand (in terms of buying) coming into the stock/index.
• Support level is always below the current market price.
• Support level often acts as a trigger to BUY

Target for a short trade = Support point

Find the Support & Resistance Level

1. Load Data Points

   • Short-term S&R - Take 3-6 months of data points for the particular stock.
   • Long-term S&R - Take 12-18 months of data points.

2. Identify ≥3 price action zones

   • Price action zones are regions where the price fluctuates for considerable time.
   • Sharp reversals at particular price point are visible before & after these zones.

   

3. Align the price action zones:

   • Find 3 price action zones fitting lying on the same price point.
   • These price action zones should be as far away as possible. (The farther they are, the stronger the prediction of S&R levels).

4. Fit a horizontal line:

   • Connect these price action zones (PAZs) with a horizontal line.
   • If the line is ABOVE the current market price, its a RESISTANCE Line.
   • If the line is BELOW the current market price, its a SUPPORT Line.

Better to assume a small band for both resistance & support level since the line draw is an approximation.

Volumes