Support and Resistance Basics A Comprehensive Guide to Setting Targets and Navigate the Markets with Confidence

  1. Technical Analysis
    1. How Technical Analysis Can Help You Make Informed Decisions in Mastering Stock Trading
    2. Technical Analysis Setting Realistic Expectations
    3. Introduction to Technical Analysis and Assumptions
    4. Technical analysis for Profitable Trades Analyzing Open, High, Low, and Close
    5. Candlestick Charts How Line and Bar chart Enhance Market Analysis
    6. Japanese Candlesticks History, Anatomy From Ancient Japan to Global Trading Phenomenon
    7. Time Frames in Technical Analysis Unlocking the Power of Choosing the Right Interval for Successful Trading strategy
    8. Candlestick Patterns How to Identify and Interpret Trading Signals
    9. Marubozu and Bullish Marubozu Understanding What is Essential Single Candlestick Patterns for Traders
    10. Marubozu Candlestick Setting Stop Loss The Ultimate Guide to Trading Patterns
    11. Spinning Top Candlestick Navigating Downtrends A Trader’s Guide to Identifying Reversal Signals
    12. Spinning Top and Doji How to Interpret and Navigating Market Uncertainty
    13. Paper umbrella and hammer candlestick pattern Unlock Profitable Trades
    14. Hanging man candlestick pattern Profitable share market trading Strategies
    15. Shooting Star Candlestick Pattern Boost Your Trading Success Guide
    16. Engulfing Patterns and Bullish Engulfing Signals Unlock Trading Opportunities
    17. Bearish Engulfing and Doji for Trading Success Profitable Strategies with Candlestick Patterns
    18. Multiple Candlestick Patterns Insights and Strategies Boost Your Trading
    19. Bullish Harami Candlestick Pattern for Trend Reversal Strategies
    20. Shorting Guide using the Bearish Harami Pattern Trade Reversals with Confidence
    21. Morning Star Candlestick Pattern and Gap Analysis To Maximise Your Profits
    22. Evening Star Candlestick Pattern Learn How to Identify and Trade to Boost Your Trading Success
    23. Support and Resistance Basics A Comprehensive Guide to Setting Targets and Navigate the Markets with Confidence
    24. Support and Resistance Learn How to Draw and Identify Key Levels Unlocking Trading Opportunities
    25. Support and Resistance Advanced Trading Strategy Analysing Reliability and Optimisation
    26. Volume Trends How to Leverage for Successful Trading Strategy
    27. Volume Analysis A Key Checklist for Successful Stock Trading
    28. Moving Averages A Comprehensive Guide for Trend Analysis in Stock Trading
    29. How to Use Moving Averages for Profitable Trading Strategy and Potential Opportunities
    30. Moving Average Crossover Boost Your Trading Success with A Reliable Strategy
    31. Technical indicators How to Use Technical Tools for Better Decision-Making Unlocking the Power of Trading
    32. Relative Strength Index RSI Analysing Overbought and Oversold Signals to Boost Your Trading Strategy
    33. MACD How to Interpret and Utilize Moving Average Convergence and Divergence for Profitable Trading
    34. Bollinger Bands The Power of Indicators in Trading and checklist
    35. Fibonacci Retracements Unravelling the Power in Stock Markets
    36. Mastering Fibonacci Retracement A Step-by-Step Guide for Effective Trading
    37. Dow Theory Decoding Unveiling the Principles of Technical Analysis
    38. Dow Theory Patterns Unlocking Trading Opportunities with Double and Triple Formations
    39. Trading Range Explained chart indicator example strategy Profit from Market Ranges
    40. Flag Pattern and Range Breakout How to Capitalise Trading Beyond Boundaries
    41. Risk reward ratio Understanding RRR in Dow Theory
    42. Technical Analysis Tools for Traders Charting Software Guide Enhance Your Trading
    43. How to Select Stocks for Trading Success and Building Your Opportunity Universe
    44. Short Term Trading Unleashing the Power of Scalping Strategies
    45. ADX Indicator and 7 more indicator tools for Trend Strength Analysis
Marketopedia / Technical Analysis / Support and Resistance Basics A Comprehensive Guide to Setting Targets and Navigate the Markets with Confidence

Support & Resistance

We talked about entry and stop loss points when covering candlestick patterns, but we haven’t yet looked into the target price. Let’s get that out of the way in this chapter.

The target price can be identified through the use of support and resistance points. These points represent certain prices where there is expected to be an increase in buying or selling activity. Support refers to a price where buyers are more numerous, while resistance occurs when sellers dominate.

Traders can also utilise support and resistance levels to locate optimal entry points when trading independently.

The Resistance

Resistance can be seen as a cap that restricts prices from growing further; it’s a price point on the chart in which traders anticipate ample supply to be created if reached. This level is always situated at a higher rate than the current market cost.

The probability of the price reaching the resistance point, levelling out briefly as it absorbs all supply and then declining is high. This technical scrutinisation tool is especially important for those trading in a bull market – resistance is often the catalyst for selling.

Let us take a moment to envision L&T at Rs. 206 forming a bullish marubuzo. This is considering a low of 202. This pattern alerts us to start a long trade, for which the stoploss is 202. Furthermore, our newfound knowledge on resistance reveals that we can set 215 as a potential target for this trade!

You may be curious as to why 215. The answer is easy:

  1. It appears probable that there is an abundance of supply due to the 215 resistance.


  1. Too much supply creates downward pressure on prices.


  1. Selling activity has a tendency to drive prices down.

Once the resistance has been identified, we can put together a comprehensive plan for our long trade. 

An entry at 206 with a stop-loss order placed at 202 and a target of 215.

The next logical step would be determining the resistance level. Identifying potential support or resistance is quite straightforward. Whether it’s a support or a resistance depends on where the current market price stands in relation to the identified point: below, it constitutes a resistance, while the above suggests a support.

Let’s move on to understanding ‘support’, and then we will look at the steps to identify S&R.

The Support

Gaining knowledge of resistance and grasping what the support level is should appear straightforward. As the name implies, support impedes the cost from going lower. The support level can be seen on a chart as a price where there could be a maximum number of buyers. Whenever the price reaches this line, there is usually a rebound. The support level is always beneath the current market value.

The likelihood is high that the price could continue to drop until it reaches the support level. This is a key technical point for investors to look out for in a bearish market, as it often acts as a sign to start buying.

Zensar Technologies Limited displays a support level of 435.

Be sure to take note of several aspects on the chart shown above.

  1. The support level, as indicated by the horizontal line, lies below the current market price.


  1. At present, the price level is 442.5, with the support at 435. Pointing out the current candle for your convenience, it is encircled.

Let us consider a bearish pattern, which in this case may be exemplified as a shooting star at 442 with its high as 446. Taking this into account, the signal to enter is too short Cipla at 442 with 446 as stop loss and 435 as the target level since it is regarded as the immediate support.

This target of Rs.435 is backed by several reasons which make it worthy. These include:

  1. Support above 435 suggests the possibility of additional demand, signalling that market demand may outpace supply.


  1. Increased demand leads to an uptick in prices.


  1. Buying can increase the price, as demand pushes it up.


Therefore, when someone holds a short position, they should utilise support levels to establish limit orders and exit points for the trade.

Having identified the support, the short trade has been formed.

Entry point – 442, cut loss – 446, and objective – 435.