Novice Traders' Notebook  |  JUL 1999

Identifying Crucial Support And Resistance Levels by Ned Gandevani

Identifying Crucial Support And Resistance Levels One tenet of technical analysis is the concept of support and resistance. In it, markets stop declining, thereby establishing a support level. A resistance level is set when a rally completes its rise. Some support and resistance levels may be more important than others. Here’s a way to determine the key levels. A look at market movement tells us that price fluctuates between a level of support and a level of resistance. Recognizing key support and resistance levels can improve our ability to enter, exit, and manage our trades. So how can we determine which support and resistance levels are the most important? Looking at an intraday S&P price chart, we find a multitude of such levels — and the market pays respect to some, while it completely ignores others.

by Ned Gandevani, Ph.D.