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Stock Resistance and Support

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  • Resistance and Support price levels
  • Resistance and Support types and strength
  • Resistance and Support Tips
Disclaimer: This is NOT investment advice, just general help and opinions, please check with a registered investment advisor before making any investment decisions. This document may contain errors. Chapman Advisory Group LLC employees are not investment advisors. Please review:
Resistance and Support price levels
Stock chart of resistance and support
  • Stock resistance is a price level at or above the current price which provides resistance against any upward movement. ie. The stock may rally to resistance.(labeled as red lines on the 8 month chart)
  • Stock support is a price level(or area) at or below the current price which provides support against any downward movement. ie. The stock may pullback to support.(labeled as blue lines on the 8 month chart)
  • A neutral "support or resistance" price level provides resistance from upward movement and support from downward movement. ie. The stock is stuck at this price level.(labeled as a grey line on the 8 month chart)
  • Resistance and support levels are shown as price areas having a width (+ and -) in stock points.
Resistance and Support types and strength
Stock Resistance and Support types and strength
  • Support and resistance types vary from the weakest Single (S), Double (D), Triple (T) to strongest more than Triple (T+). (S,D,T,and T+ are the labels used on the 8 month stock chart)
  • The type refers to the number times a stock has been rejected at resistance or bounced off support areas over the past 8 months (Single=1 time, Double=2 times, Triple=3 times, Triple+= more than 3 times). The more times the stronger the resistance or support area.
    • Triple resistance stock chart example:
      Triple resistance stock chart
  • Support and resistance areas have a strength which varies from 1-10. This number represents the amount of stock accumulation or distribution volume at each area as shown on the chart above.
  • Weak resistance and support areas created with light distribution or accumulation volume have a strength from 1-3.
Resistance and Support Tips
  •  Strong stock tops with high volume can create strong resistance (type single) with a strength of 8-10 (high distribution). This will provide a strong resistance area if a stock revisits that top on a future rally. Same is true for the creation of a stock bottom (type single support, strength 8-10, high accumulation) which is revisited on a future pullback.
  •  After a good stock rally (short term direction 7+) a resistance area will have a larger impact. Early in a stock rally there will be strength to overcome the local resistance area. The same effect occurs when a stock hits support after a good sized pullback, the support's impact/strength will be greater.
  •  In very congested resistance/support areas, with one resistance or support after another may need to be treated as one wide band. The stock may exhibit very choppy (up and down) closing price swings in this band.
  •  Over time stock resistance and support areas change and are dynamic. You have to be flexible and set up rules to deal with the formation of new resistance and support areas.
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