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--- chart_analysis:support_and_resistance [2023/09/12 19:23]
jayanthi [Support and Resistance Zones]
+++ chart_analysis:support_and_resistance [2023/09/12 19:29]
jayanthi [The Bottom Line]
@@ Line 82: / Line 82: @@
 Returning to the analysis of Halliburton (HAL), we can see that the November high of the trading range (32 to 44) extended more than 20% past the October low, making the range quite large relative to the price. Because the September support break forms our first resistance level, we are ready to set up a resistance zone after the November high is formed, probably around early December. However, we are still unsure if a large trading range will develop. The subsequent low in December, which was just higher than the October low, offers evidence that a trading range is forming, and we are ready to set the support zone. As long as the stock trades within the boundaries set by the support and resistance zone, we will consider the trading range to be valid. Support may be looked upon as an opportunity to buy, and resistance as an opportunity to sell.
-===== Conclusion =====
+===== The Bottom Line =====
-Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it is sometimes difficult to establish exact support and resistance levels, being aware of their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. **If a support or resistance level is broken, it signals that the relationship between supply and demand has changed.** A resistance breakout signals that the bulls (demand) have gained the upper hand and a support break signals that the bears (supply) have won the battle.
+Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it's sometimes difficult to establish exact support and resistance levels, knowing their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security approaches a resistance level, it can act as an alert to signs of increased selling pressure and potential reversal. **If a support or resistance level is broken, the relationship between supply and demand has changed.** A resistance breakout signals that the bulls (demand) have gained the upper hand, and a support break signals that the bears (supply) have won the battle.
+===== Support and Resistance Level FAQs =====
+==== Why is the identification of support and resistance levels important in technical analysis? ====
+Identifying key support and resistance levels helps in forecasting and analysis. The levels act as alerts for potential reversals and signify changes in the relationship between supply and demand.
+==== How is the concept of supply and demand related to support and resistance? ====
+In the financial markets, prices are driven by excesses of supply (which pushes prices down) and demand (which pushes prices up). When supply and demand are equal, prices move sideways. Support is the level where demand is strong enough to prevent the price from declining further, while resistance is where selling is strong enough to stop the price from rising further.
+==== What does it mean when support turns into resistance and vice versa? ====
+When a price breaks below a support level, the broken support can become a resistance level. Likewise, when the price rises above a resistance level, it can become a new support. This shift indicates changes in supply and demand dynamics.
+==== What do support and resistance level breaks signify? ====
+A break below support indicates sellers are willing to sell at even lower prices. It also indicates a lack of buyers. Conversely, a break above resistance shows a new willingness to buy at higher prices, and there's a lack of sellers.
+==== How are support and resistance levels related to trading ranges? ====
+A trading range is when prices move within a narrow range, signaling balanced supply and demand. A break above or below this range indicates that either the bulls (for an upward break) or bears (for a downward break) have taken control.