Support and resistance

Support is a price area where falling prices have stopped and turned up before, because buyers showed up there. Resistance is the mirror image: an area where rising prices have stalled because sellers showed up. You find them by looking left on the chart for places where price reversed more than once.

Two points are often missed. First, these are zones, not exact lines; expect price to overshoot or fall short by a little. Second, roles reverse. When resistance is broken decisively, it often acts as support on the way back, and broken support often becomes resistance. Traders call the return visit a retest.

In Indian markets the commonly watched levels are the previous day's high, low and close, the day's opening range, round numbers such as 25,000 on Nifty or 56,000 on Bank Nifty, and swing highs and lows on the daily chart. In index options, strikes with heavy open interest are often treated as likely support or resistance, though they shift during the day.

The common mistake is drawing too many lines. With a level every 20 points, price is always near one and none of them means anything. Keep the few that are obvious at a glance. The other mistake is assuming a level must hold. Levels do break, and a stop-loss placed exactly on an obvious level is easily hit by a small overshoot.