Support, resistance and trend
Most technical analysis comes back to two questions: which way is the market trending, and where are the levels that matter?
Support and resistance
Support is a price where buying has repeatedly stopped declines. Resistance is where selling has repeatedly capped rallies. They form for real reasons:
- Memory and regret: buyers who missed a stock at 100 may buy if it returns there. Holders who bought at 120 and watched it fall may sell when it gets back to break-even.
- Orders: institutions often leave large orders around round numbers and prior highs and lows.
- Options and positioning: large open interest at a strike can pin price nearby (lesson 3.4).
When resistance breaks, it often becomes support, and vice versa. Levels are zones, not exact lines.
Trend
An uptrend is a series of higher highs and higher lows. A downtrend is lower highs and lower lows. A range is neither. The simplest rule of trend following is not to fight it: buy pullbacks in an uptrend, sell rallies in a downtrend.
Moving averages
A moving average smooths price over a period. The 50-day and 200-day are the most widely watched in stocks. Price above a rising 200-day average is the most common definition of a long-term uptrend. A 50-day crossing above the 200-day (a golden cross) or below it (a death cross) gets headlines, but these signals lag and frequently whipsaw in sideways markets.
Timeframes
A stock can be in a daily downtrend inside a weekly uptrend. Decide which timeframe matches your holding period, and use higher timeframes for context. Most mistakes come from trading a 5-minute chart against a clear weekly trend.
Key takeaway
Levels show where others have acted before. Trends show who is in control. Both are most useful as a framework for risk (where you are wrong) rather than predictions.
Educational content only, not financial advice. Investing involves risk and you can lose money.