Lesson 9: The Pillars of Price Action - Support and Resistance
Part of Module 3: Technical Analysis - The Art of Reading Charts
Introduction: The Battlegrounds of the Market
Now that you can identify the market's general direction (the trend), the next step is to find the specific price levels where the market is likely to turn or pause. These key levels are called Support and Resistance. Think of them as the major battlegrounds where buyers and sellers fight for control.
Support (The Floor)
Support is a price level or zone where buying pressure is strong enough to overcome selling pressure, causing the price to stop falling and "bounce" back up. It's typically found at previous major swing lows.
Analogy: Imagine a ball bouncing on a floor. The floor prevents the ball from falling further. Support acts as a floor for price.
Resistance (The Ceiling)
Resistance is a price level or zone where selling pressure is strong enough to overcome buying pressure, causing the price to stop rising and turn back down. It's typically found at previous major swing highs.
Analogy: Resistance is like a ceiling that prevents the ball from going any higher.
How to Identify and Draw S&R Zones
It is crucial to remember that Support and Resistance are zones, not exact lines. Price will rarely turn at the exact same price every time. To find them, look for areas on your chart where the price has reversed multiple times in the past and use the rectangle tool in TradingView to draw a box covering those areas.
The Role Swap: A Critical Concept
This is one of the most powerful principles in technical analysis. When a strong support or resistance level is broken, its role often flips.
- When a resistance level is broken, it often becomes the new support.
- When a support level is broken, it often becomes the new resistance.
Analogy: Think of a multi-story building. You are on the first floor, and the ceiling is your resistance. If you break through the ceiling, you are now on the second floor. That old ceiling is now your new floor (support).