Support and resistance

Support and resistance is basically the point at which the imbalance between supply and demand has reached parity. In the battle between the bulls and the bears, it is a standoff point on which neither sides has enough steam to either continue or reverse the trend. In stocks, resistance is the point where the price is having a hard time piercing the next price level. Support for stocks is caused by stockholders not willing to give up their shares when there is a heavy downward pressure or shares that are being dumped no matter how big the volume, continually finds buyers to pick it up, thus preventing the share price from plummeting past a level.

In the Foreign Exchange market, support and resistance refers to the base currency. For instance when referring to the resistance level for the GBP/USD pair (Pound/US dollar). The resistance level to which the pound could not easily break higher is also the support level for the US dollar preventing it from plummeting down in value against the British Pound

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