Support and Resistance
Price levels at which a stock has historically tended to stop falling (support) or stop rising (resistance) due to concentrated buying or selling pressure.
What is Support & Resistance?
Support is a price level at which demand is historically strong enough to prevent a stock from falling further — buyers consistently step in near this level. Resistance is a price level where supply historically overwhelms demand, preventing the price from rising higher. These levels are identified by examining historical charts for points where price has reversed multiple times. When price breaks through a resistance level on high volume, that level often becomes new support — a concept called role reversal. Support and resistance levels are central to technical analysis and are used by traders to time entries, exits, and stop-loss placement. Psychological round numbers (e.g., $100, $500) often act as natural support and resistance levels.
Example
Tesla shares tested the $200 price level multiple times throughout 2023, with the stock bouncing off that level on each occasion as buyers viewed it as a fair value floor. When Tesla finally broke decisively below $200 in late 2023 on elevated volume, the former support at $200 became resistance on subsequent rally attempts — a textbook example of support turning into resistance after a breakdown.