Technical analysts use multiple ways to assume the future stock price in the market. And once you have studied trends, the next important topic in technical analysis is support and resistance.
What is Support level:
This is a level at which the share price does not fall down any further. The share price is expected to bounce back and moves up in the opposing direction. At the support level, the buyer’s demand is higher than the supply.
What is Resistance level:
A resistance level is the contrary of a support level. It is a price point at which the share price is not allowed to rise any higher. Here there are more sellers than buyers for the particular stock.
Breakouts in levels
The support and resistance levels give the trader an idea about the stock price movement. However, the share price may break via these levels. And when this occurs, a new resistance and support level is formed.
If the support level is breached, the share price falls until it hits a new support level. And if the resistance level is breached, the stock price remains to increase upward until it hits a new resistance level.
