Support and Resistance
Learn how to calculate and interpret Support and Resistance with its formula, a worked example, industry context and common mistakes.
Identifies price areas where buyers or sellers have previously reacted.
Formula
Support uses prior swing lows; resistance uses prior swing highs
Worked exampleIf a stock repeatedly rebounds near $50 and stalls near $60, $50 is support and $60 is resistance.
Calculation steps
- Find recent swing lows for possible support.
- Find recent swing highs for possible resistance.
- Measure how far the latest close is from those levels.
How to interpret it
Support can help frame downside risk, while resistance can mark a level where momentum may need confirmation.
Industry context
Highly liquid large-cap stocks often respect levels differently from thinly traded or news-driven stocks.
Accounting and market variations
Definitions, reporting choices, periods, capital structures, and market conventions can change how this metric should be compared.
- Do not treat levels as exact prices.
- Re-check levels after splits, gaps, or major news.
- Confirm breakouts with closing price and volume.