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WHAT IS SUPPORT AND RESISTANT ?

Support and resistance are fundamental concepts in technical analysis used to identify price levels on charts that are likely to act as barriers, preventing the price from moving in a certain direction.

Support:

Definition: Support refers to a price level at which an asset tends to stop falling because demand is strong enough to prevent further declines. It acts as a "floor" for the price, where buyers step in to buy the asset, causing the price to rebound or stabilize.

Example: If a stock is trading at $50 and repeatedly fails to drop below that level, $50 would be considered a support level.

Resistance:

Definition: Resistance is the opposite of support. It refers to a price level at which selling pressure is strong enough to prevent the price from rising further. It acts as a "ceiling," where sellers are more willing to sell, causing the price to reverse or consolidate.

Example: If the price of an asset repeatedly fails to rise above $100, $100 would be considered a resistance level.

In Practice:

Support and resistance levels are used by traders to make decisions about buying and selling. If the price approaches support, traders may see it as a potential buying opportunity. If the price approaches resistance, they may consider selling or shorting the asset.

If price breaks through a support or resistance level, it can signal a significant price movement. For example, a price moving above resistance may indicate an uptrend, while a price falling below support could indicate a downtrend.

These levels are not always exact and may vary slightly, often being identified as areas rather than precise lines on a chart. They are key tools for understanding market psychology and price behavior.