Support and Resistance
Support and Resistance are key concepts in technical analysis that are used to identify levels at which the price of an asset is likely to find support as it falls, or resistance as it rises. These levels can be used by traders to determine entry and exit points for their trades. Support is a price level at which demand for an asset is strong enough to prevent the price from falling further. This is because as the price approaches the support level, buyers start to come in and buy the asset, thereby pushing the price back up.
Resistance is a price level at which supply of an asset is strong enough to prevent the price from rising further. This is because as the price approaches the resistance level, sellers start to come in and sell the asset, thereby pushing the price back down.
It is also important to note that Support and Resistance may be a price a level or an area of price.
Here are a few examples to illustrate these concepts:
Support: TESLA been trending downward for a while. As the price approaches the $208 area, buyers start to come in and push the price back up. This level where the price finds support is called a support level. The idea is that as the price approaches this level, it is likely to bounce back up because there are a lot of buyers at that price.
Resistance: TESLA has been trending upward for a while. As the price approaches the $400 to $420 area, sellers start to come in and push the price back down. This level where the price encounters resistance is called a resistance level. The idea is that as the price approaches this level, it is likely to stall or pull back because there are a lot of sellers at that price.