LeoGlossary: Support (Technical Analysis)
A support level is an area where a price does not fall through for a certain period of time. It is a region where the price moved in the past and failed to break through on the downside. Hence, traders and investors look at this as an area where downward price movement can cease.
This can apply to any asset or security as historical data reveals trends that occur over time.
Support lines can often be drawn by connecting the lows over a certain period of time. These can be flat, downward or upward sloping. They will often go in the direction of the trend of the market or asset.
These are often used for entry and exit points.
When price falls to support, many will buy the security or asset since the tendency is to see a reversal and the price to ascend. If support doesn't hold, it can often be an indicator for one to exit the position as a larger move down might be in order.
If a support line is broken, that becomes resistance as a new support level is formed.
Support and resistance lines can often parallel each other, forming a channel which an asset will trade within. Again, this can be flat, or upward/downward sloping.
This is utilized as part of technical analysis.
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