Support and resistance: what they are and how to find the levels on a chart
Support and resistance on a real stock: Coca-Cola 2023-2025
The level is red while it acts as resistance and blue from when it acts as support; the light band is the ±1.5% zone around the level. The touches are numbered in the order they came.
What support and resistance are
Fig. 1 · Anatomy
- Support is the level where the decline stopped: there the buyers had the upper hand.
- Resistance is the level where the rise stopped: there the sellers won.
- A level is only visible afterwards: one touch is needed to notice it, more are needed to trust it.
- Between a support and a resistance the price swings back and forth: that is a trading range.
Why they form and how they switch roles
Fig. 2 · The memory of the market
- Where heavy trading took place, many people have a price in mind.
- Those who bought there and are in profit buy again on the return; those who sold too early get back in.
- Those who stayed out wait for exactly that return to get in.
Fig. 3 · Broken support becomes resistance
- As long as it holds, the level stops the decline.
- Broken to the downside, those who bought at the support are losing: on the return they sell to get out even.
- So the same level now stops the rise.
Fig. 4 · Broken resistance becomes support
- It works the other way too: broken to the upside, the resistance is transformed.
- Those who sold below the level watch the price run away: on the return they buy back.
- In an uptrend every old peak becomes the floor of the next leg up.
A zone, a real break, round numbers
Fig. 5 · A zone, not a line
- Lows never land on the same cent: one stops a little short, one pierces slightly.
- That is why the level is drawn as a band: here ±1.5% around the central price.
- A touch inside the band counts as a touch.
Fig. 6 · The break: the close is what counts
- A session low below the level is not enough: the close comes back above and the support holds.
- A close beyond the level breaks it, better if beyond a filter: 3% of the price.
- It is the same filter used for the trendline.
Fig. 7 · Round numbers
- Orders cluster on round figures: 10, 50, 100.
- That is why the price likes to stop just below or just above a round number.
- Once cleared, the round number acts as support like any other level.
Deeper dives: the trendline.
How much a level counts
five things to look at, with the numbers of the Coca-Cola example1How many touches
- one touch makes the level noticeable, three confirm it
- every extra touch is another group of buyers or sellers that respected it
here: 4 touches, 2 from below and 2 from above
2For how long
- a level that holds for months is worth more than one of a few weeks
- the longer trading went on there, the more people remember it
here: 364 sessions between the first and the last touch, about 17 months
3On what volume
- heavy trading at the level means many hands involved
- a touch on light volume is less convincing
here: on the touch days volume was 1.2 times the period average
4How strong the reaction
- if the price moves far away after the touch, the level really counted
- a bounce of a few cents says little
5How recent
- a level close to the current price weighs more than one from years ago
- memory fades with time and old levels count less
Interactive exerciseYour turn: find the level
Coca-Cola, the same sessions: the judge uses the rules on this page- Move the mouse over the chart: the horizontal line follows you and shows the price.
- Click where you think the price stopped several times.
- Read the verdict: the touches with their dates, from above or from below, the duration, the role reversal.
No level yet: move the mouse over the chart and click where the price stopped several times. Every turning point within ±1.5% of the level counts as a touch.
The Coca-Cola level in numbers
turning points of the 5% zigzag, touches within ±1.5%, break beyond 3%| Touch | Date | From where | Price | From the level |
|---|---|---|---|---|
| #1 | from below (resistance) | $58.70 | −0.14% | |
| #2 | from below (resistance) | $58.36 | −0.71% | |
| #3 | from above (support) | $59.18 | +0.68% | |
| #4 | from above (support) | $58.88 | +0.17% |
The break: on the close is $60.75, 3.3% above the level, beyond the 3% filter. From then on the touches come from above.
The same thresholds as the judge: a ±1.5% zone, a 3% filter for the break.
Where to go from here
The basicsThe other lessons in the «The basics» section
What is technical analysis
- the study of price and volume to recognise the trend and the levels
- three premises: price discounts everything, trends, history repeats
- exercise: uptrend, downtrend or sideways on three real charts
Candlestick chart
- the four prices of a session: body and shadows
- green and red, long and short bodies, long shadows, the doji
- find the candle on a real chart: the judge says yes or no with the numbers
Uptrend: higher highs and higher lows
- higher highs and higher lows: how to recognize an uptrend
- swing points, and the two signals that end a trend
- mark the higher lows yourself on a real chart
Trendline
- the line through rising lows: two points and the third touch
- the break with the 3% filter, the fan, the channel
- where the line runs, day by day
Frequently asked questions
What are support and resistance?
Support is the price level where a decline stopped because buyers took over; resistance is the level where a rise stopped because sellers prevailed. On the chart they show up as highs or lows lined up at the same price.
Why does a broken support become resistance?
Because those who bought at the support are losing after the break: when the price comes back to that level they sell to get out even, and their selling stops the rise. It works the other way too: a resistance broken to the upside becomes a support.
How many touches does a level need to be valid?
One makes it noticeable, two draw it, the third confirms it: on this page a level is valid with at least 3 touches within ±1.5%, at least 40 sessions apart. Time, volume and how far the price moved away after each touch count too.
When is a support or resistance considered broken?
When the price closes beyond the level, not when it only crosses it during the session. To avoid false breaks a filter is used: here 3% of the price, the same as for the trendline.
Method and sources
| Source |
|---|
| John J. Murphy, Technical Analysis of the Financial Markets: chapter 4, basic concepts of trend (support and resistance, the role reversal, round numbers). |
| Robert D. Edwards, John Magee, W.H.C. Bassetti, Technical Analysis of Stock Trends, 9th ed.: the chapter on support and resistance. |
The Coca-Cola example uses sessions from our archive, adjusted for dividends and corporate actions; the level and its touches are found again by the rule at every update. The numbered figures are diagrams drawn to explain, not prices. This guide explains how the tools work: it does not contain investment recommendations and promises no returns. Our method · licence · report an error.
DOMINA’s stock pages, indices and commodities are rebuilt every night. Leave your email: we write to you when the picture changes.
No third-party advertising. Unsubscribe with one click. Go to the platform →