8 - SUPPORT & RESISTANCE

Support line is a level where price indicates to go up because buyer (demand) is greater than seller (supply).

fig. 12

While resistance line is a level where price indicates to fall down because buyer (demand) is less than seller (supply).

fig. 13

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. (from stockcharts)

fig. 14

How to determine support line?
Support line can be drawn horizontally with the previous lows.

How to determine resistance line?
Resistance line can be drawn horizontally with the previous highs.

fig. 15