Resistance resistance level is a price point on a bar chart for a security in which upward price movement is impeded by an overwhelming level of supply for the security that accumulates at a particular price level.

Resistance levels are characteristically found at the upper levels of range bound markets. They may be very short lived, or may remain a resistance level over an extended period of time.

In the case of a range bound market, price may trade down to a near term support level at the lower end of the range before attempting again to break through the resistance level. The more times that the market attempts to unsuccessfully break through the resistance level, and the greater the amount of time between attempts, the more formidable the resistance level. Resistance and support levels are widely used by experienced traders to formulate trading strategies.

Resistance

For example, if a trader is long in a stock that is approaching a very strong resistance level, the trader may opt to close the position rather than take the risk of a significant decline in the position profit if the uptrend reverses.

Once the over-abundant supply that is concentrated at the resistance level is absorbed by the market, resistance is usually breached.

► Fractals: history/formula/definition/meaning/Mandelbrot Set Generator

At this point, resistance levels often turn into support areas. In a strong uptrend, investors and traders immediately react to a conclusive price resistance break out by taking long positions. This abrupt increase in demand, coupled with the precipitous decrease in supply, creates a sudden price spike referred to as the break out. Once supply and demand macroeconomic volatility and stock market volatility world-wide stabilize, the price usually retraces back to the original resistance level, where savvy traders are waiting with orders to buy, therefore creating a new support level.

In most cases, price then continues on its uptrend, seeking a new resistance level.

Fractals Indicator | Fractal Trading | Bill Williams Indicators | Williams Fractal | IFC Markets

The overwhelming supply that creates a resistance level may be the result of a large institutional investor liquidating a very large position in a stock at a particular price.

Until that large sell order fractals in stock market absorbed by the market, the price will remain at the particular level of the order, creating a resistance level.

Another underlying cause of resistance levels is the use of popular technical price patterns. When enough market participants react to the sell trigger points of widely used technical price patterns, resistance levels may be created. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin?

This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam.

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Resistance Resistance Level Share.

Breakout Buy Stops Above Test Trade Price Response Zone Of Resistance Breakout Trader Support Support Level Range-Bound Trading Memory-Of-Price Strategy.

Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers.

Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.