Support Level

A support level is a price point on a chart where a stock or asset tends to stop falling because buying interest increases. It represents a concentration of demand that prevents further price decline.

How Support Forms:

• Previous lows where buyers stepped in
• Round numbers ($100, $50)
• Moving averages (50-day, 200-day)
• Fibonacci retracement levels
• Volume profile (high volume price areas)

Types of Support:

1. Horizontal Support: Flat price level from previous lows
2. Trendline Support: Diagonal line connecting higher lows
3. Dynamic Support: Moving averages that rise with price
4. Psychological Support: Round numbers, all-time highs/lows

Trading Applications:

• Entry Points: Buy near support with stop below
• Stop Loss Placement: Below support level
• Risk/Reward: Calculate potential upside vs. risk to support
• Breakdowns: Support break → bearish, becomes resistance

Support Strength Factors:

• Number of times price tested the level
• Volume at the support level
• Time spent at the level
• Spacing between tests

Important Notes:

• Support isn't guaranteed to hold
• Broken support often becomes resistance
• Use with other technical indicators for confirmation