Every trader must understand support and resistance used in technical oracle analysis to determine potential price levels.
- Support is a price level where demand prevents the asset from falling further.
- Resistance is where selling pressure prevents it from rising higher.
Imagine Amazon stock hitting $130 repeatedly but not falling furtherthats support.
These levels can be:
- Static (horizontal lines)
- Dynamic (e.g., trendlines or moving averages)
- Psychological (round numbers like 100, 500, 1000)
Traders use these areas to:
- Set entry and exit points
- Place stop-losses just below support or above resistance
- Identify breakouts (when price moves beyond these zones)
When resistance is broken, it can become new support and vice versa. This is known as a role reversal.
Some tools that help confirm support/resistance include:
- Volume spikes
- RSI divergence
- Candlestick patterns (e.g., pin bars, engulfing patterns)
Popular platforms like Thinkorswim, eToro, TradingView offer drawing tools to mark these zones manually or use automated levels.
Mastering support and resistance can boost your risk/reward ratio especially when combined with other indicators.
