Resistance Level

A resistance level is a price point where a stock or asset tends to stop rising because selling pressure increases. It represents a concentration of supply that prevents further price advance.

How Resistance Forms:

• Previous highs where sellers appeared
• Round numbers ($100, $50)
• Moving averages (when price is below)
• Fibonacci extension levels
• All-time highs
• Gap fill levels

Types of Resistance:

1. Horizontal Resistance: Flat level from previous highs
2. Trendline Resistance: Diagonal line connecting lower highs
3. Dynamic Resistance: Declining moving averages
4. Psychological Resistance: Round numbers, prior ATH

Trading Applications:

• Profit Targets: Sell or trim near resistance
• Short Entry: Short sellers enter near resistance
• Breakouts: Price breaking resistance = bullish
• Role Reversal: Broken resistance becomes support

Resistance Strength Factors:

• Number of rejection points
• Volume at the level
• Price velocity approaching the level
• Time frame (daily vs weekly more significant)

Breakout Confirmation:

• Volume surge above average
• Close above resistance (not just intraday wick)
• Retest of broken resistance as new support
• Follow-through in subsequent sessions