A support level is a price level where a significant buying pressure appears to keep prices from further falling. As the price tends to decline towards the support and gets low-priced, buyers become more tempted to buy and sellers to sell. While the price reaches the support level, it is assumed that demand will surpass supply and avoid the price from falling below support.

A resistance level is a price level where a significant selling pressure appears to keep prices from further rising. As the price progresses towards resistance level, sellers become more tempted to sell and buyers to buy. While the price approaches the resistance level, it is assumed that supply will surpass demand and avoid the price from rising above resistance.

An important principle of technical analysis suggests that support can turn itself into resistance and vice versa. We may be surprised to know how it happens: once the price plunges below a support level, the broken support level can turn into resistance and similarly, the other side of the coin is price hiking above a resistance level and turning itself into support. Now, because technical analysis is not an exact science, it is sometimes very essential to create support and resistance zones rather than just the levels. At times, exact support and resistance levels are best, and there are also instances when zones work better than the just the levels. If the trading duration is less than 2 months and the price range is relatively taut, then the exact support and resistance levels are best suited but if a trading duration is in months and the price range is relatively fat, then support and resistance zones suit the most.

Fig 1: Support & Resistance Levels