Support and resistance
Support is a price level where falling prices have tended to stop because buyers step in, and resistance is a level where rising prices have tended to stall because sellers step in.
What it is
Look at any chart and you will see prices that keep turning at roughly the same levels. When a share falls to ₹500 three times and bounces each time, ₹500 is acting as support. When it rises to ₹600 several times and turns back, ₹600 is resistance.
These levels form because people remember prices. Buyers who missed the last bounce at ₹500 wait to buy there again. Holders who bought at ₹600 and saw losses are happy to sell when they get back to break-even.
How to find them
Mark obvious turning points on a daily or weekly chart: past highs, past lows and areas where price spent a lot of time. Think of them as zones, not exact lines. A level at ₹500 might really be ₹495 to ₹505.
The more times a level has held, and the more volume traded there, the more attention it gets. Round numbers and moving averages like the 200-day line can also act as support or resistance.
When levels break
Support and resistance are not walls. They break, often on news or heavy volume. When they do, they often swap roles: old resistance can become new support after a breakout, and old support can become resistance after a breakdown.
This is why traders who use levels also use stop-losses. If a share closes clearly below support, the reason to hold it based on that level is gone.
A range between two levels
Over four months a share falls to around ₹380 three times and bounces each time. It also rises to around ₹440 twice and turns down. ₹380 is support and ₹440 is resistance. Later the share closes at ₹452 on heavy volume. On the next dip it holds near ₹440. Old resistance has become new support.
Common mistakes
- Drawing levels to the exact paisa instead of treating them as zones.
- Assuming a level will hold forever because it held before.
- Drawing so many lines that every price looks like a level.
A share broke above resistance at ₹300 and later falls back to ₹302. What often happens at the old resistance?
- It can act as support, as buyers step in near the old level
- Price must fall to zero
- Old resistance has no meaning once broken
Show the answer
It can act as support, as buyers step in near the old level. Broken resistance often becomes support. Traders who missed the breakout and earlier sellers who want back in tend to buy near that level.
Common questions
How do you identify support and resistance?
Look for prices where the share has turned several times, especially past highs and lows on a daily or weekly chart. Treat them as zones rather than single lines.
Why does resistance become support?
After a breakout, people who missed it and those who sold too early often want to buy near the old level, which creates demand there.
How strong is a support level?
Levels that have held several times on high volume usually get more attention. No level is guaranteed to hold.
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