Support and resistance are two crucial components of technical analysis. They operate on the principle of supply and demand.
Support
Support can be thought of as the ‘floor’ of a price range. It is the price level where buyers overcome sell pressure and prevent the price from dropping any further.
Resistance
Resistance is the opposite of support. It can be thought of as the ‘ceiling’ of a price range. It is the price level where sellers overcome the buying pressure and prevent the price from rising any further.
Both support and resistance are temporary and will eventually break when either the buying or selling pressure eventually overcomes the other. If support is broken, that level will often be tested as resistance. Likewise, if resistance is broken, that level will often be tested as support.
