Support and Resistance Analysis
Support and resistance levels are fundamental concepts in technical analysis that help identify key price points where market psychology and trading activity concentrate.
Understanding Support & Resistance
Support Levels
Price levels where downward movement typically slows or reverses.
- • Acts as a "floor" for price
- • Created by buyer concentration
- • Often previous low points
- • Can become resistance if broken
Resistance Levels
Price levels where upward movement typically slows or reverses.
- • Acts as a "ceiling" for price
- • Created by seller concentration
- • Often previous high points
- • Can become support if broken
Why They Matter
Trading Applications
Entry Points
- • Buy near support levels
- • Sell near resistance levels
- • Trade breakouts/breakdowns
Risk Management
- • Place stops beyond levels
- • Set profit targets at levels
- • Adjust position sizes
Types of Levels
Static Levels
- • Historical price points
- • Psychological levels (round numbers)
- • Previous highs and lows
Dynamic Levels
- • Moving averages
- • Trend lines
- • Fibonacci retracements
Real Example: ETH/USD
Current Levels
- • Resistance at 2,720 (previous high)
- • Support at 2,680 (recent consolidation)
Analysis
Price is approaching resistance at 2,720. A breakout above this level with strong volume could signal continuation of the uptrend. The 2,680 support level provides a potential stop-loss point for long positions.
Trading Tips
- • Levels become stronger with more touches
- • Volume confirms level importance
- • The longer a level holds, the more significant it becomes
- • False breakouts are common - wait for confirmation
- • Multiple timeframe analysis provides better context