Support
Technical Analysis
What it means
A price level where buying tends to appear and stop a decline. Price has bounced there before, so traders expect it to hold again.
Example
A stock drops to $50 three times over six months and bounces each time. $50 is support; traders place buy orders there expecting another bounce.
Mistake beginners make
Beginners treat support as a hard floor and buy with no stop. When support breaks, it often breaks hard -- the buyers are gone and price falls through fast.
Related terms
- Resistance — A price level where selling tends to appear and stop a rally. Price has stalled there befo…
- Trend — The overall direction price is moving over a period. Up trends make higher highs and highe…