20th February 2008, 07:52 PM
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Regular Member
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Join Date: Oct 2007
Location: Mumbai
Posts: 337
Rep Power: 10
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Support and resistance
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Originally Posted by Alchemist
It works both ways.
Those who wanted to sell above 1030 could not do that today.
Thus, they will sell every time the stock goes near 1030 and this will act as a resistance.
Whether the range acts as a support or resistance depends on where the price goes in the short term.
If the stock goes below 950 tomorrow, then this range will become the resistance zone.
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In other words, when a stock is going downwards, there is a level at which it will stop decreasing.
That is, at that lowest price, almost everyone thinks that the stock is attractively priced and it wont reduce further.
At this lowest level, the stock is said to have "support".
As for resistance, many investors/traders keep a sell price for their stock.
The stock, when it reaches certain point, evokes selling pressure in market.
This makes it difficult for the scrip to go above that level easily.
The scrip is said to have Resistance at that price.
In the chart below, the BSE is said to have support at the red line. Check out Alchemist's thread on Sensex. Its wonderful.
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Support & Resistance?
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