SUPPORT AND RESISTENCE IN STOCK MARKET

In stock market, support and Resistance symbolizes key junctures where the forces of supply and demand meet.  Prices are driven by excessive supply (down) and demand (up).  Thus technical analysis is very much important in the wake of knowing buy/sell signal.  Supply is synonymous with bearish, bears and selling.  Demand is synonymous with bullish, bulls and buying.  These terms are used interchangeably throughout this and other articles.  As demand increase, prices advance and as supply increases, prices decline.  When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

SUPPORT?

Support is the price level at which demand is thought to be strong enough to prevent the price from decline further.  The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined be it intraday or delivery.  The intraday trading software can make out a picture of it by assimilating the data and putting out result even about nifty futures.  The best trading software must be able to grasp the support of a falling stock so that it may help investors to know where to enter, especially reading live buy/sell signal.

RESISTANCE?

Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.  The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy.  By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rise above resistance.  Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears.  A break above resistance shows buyers have increased their expectations and are willing to buy at even higher prices.  In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high.  Once resistance is broken, another resistance level will have to be established at a higher level.

The Importance of Support and Resistance

Notwithstanding the fact, support and resistance analysis is an important part of trends because it can be used to make intraday trading decisions and identify when a trend is reversing. For example, if a trader identifies an important level of resistance that has been tested several times but never broken, he or she may decide to take profits as the security moves toward this point because it is unlikely that it will move past this level.  The intraday traders in nifty futures analyses live buy/sell signal after giving enough thought to his technical analysis.

The Nifty trading system based on online trading software do care importance of support and resistance in both, intraday trading as well as reading between live buy/sell signals for delivery trade.  Chart analysis also gives a picture of how to draw proper support and resistance level for option trading.

Support and resistance levels both test and confirm trends and need to be monitored by anyone who uses technical analysis. As long as the price of the share remains between these levels of support and resistance, the trend is likely to continue. It is important to note, however, that a break beyond a level of support or resistance does not always have to be a reversal. For example, if prices moved above the resistance levels of an upward trending channel, the trend has accelerated, not reversed. This means that the price appreciation is expected to be faster than it was in the channel.  The best trading software includes all such aspects to give an authentic idea about the stock market as well as commodity market. 

Undoubtedly this also helps in analyzing nifty chart while trading in nifty future with the help of intraday trading software.  Even pattern of nifty live can be accrued well by knowing proper support and resistance in intraday trade.  Intraday tips providers too, study it properly before making confidant decision.

How to draw a valid Support and Resistance?

In fact, drawing valid support and resistance is the most important concepts when it comes to forecast any financial market (Forex, stocks, futures, etc).  Drawing the key levels of support and resistance that I feel are the most significant in the current market environment.  It really is a very logical and but not simple task. I think, support and resistance levels, some traders might disagree with me, but the information we could get from these levels could actually help one trade with better results.

There are three things the market could do after hitting a support or resistance level:

1.     Retrace

2.     Change direction

3.     Stall

Knowing what the market is likely to do after reaching one of these levels, we could adapt our strategy to trade based on that information: on what the market is likely to do. Therefore, we need to know how to draw support and resistance levels and be prepared to make the necessary changes to our strategy:  move your stop loss levels, close your trade, add to your trade, etc.

Simple rules to draw perfect support and resistance levels in stock market.

Rule No. 1: the market needs to get rejected at least twice from the level (not one, twice).

Rule No. 2: the more rejections the level has, the more important it becomes

Rule No. 3: most recent rejections are more important than less recent rejections

The resistance level;  it’s very important, the market has been rejected three times from the same level. If there was another resistance level near this one, with only two rejections, the one would be more important for chart analysis and knowing stock behaviour.

Now, about the support levels (both have three rejections), which one is more important

Conclusion:

There is one rule which one must follow: only take on consideration the support and resistance levels that the market is actually taking in consideration. Why one act would base on a level that the market is responding to?  Some intraday software religiously follows it so that best intraday tips can be provided for intraday trading.

One important thing to consider:

support and resistance levels are in intraday trade most important to know.  It is more like zones instead of levels. So don’t break your head trying to figure out where to draw your level: at close of the candlestick, at the lowest low, etc. Just draw it where it touches the most rejections be it commodity trading, intraday stock trading or nifty future.

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