What is support and resistance ?

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# **What is Support and Resistance?**

## **1️⃣ Introduction to Support and Resistance**
Support and resistance are fundamental concepts in **technical analysis** that help traders identify **key levels** where price movement is likely to react.

📌 **Support**: A price level where demand is strong enough to prevent the price from falling further.
📌 **Resistance**: A price level where selling pressure is strong enough to prevent the price from rising further.

These levels act as **barriers** where the price tends to **reverse or consolidate** before making the next move.

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## **2️⃣ Understanding Support**
**Support is a level where the price tends to stop falling and bounce back up.**
- It forms when buyers **step in** to absorb selling pressure.
- It is often seen at previous **lows**, trendlines, moving averages, or Fibonacci retracement levels.
- If a support level is broken, it can turn into **new resistance**.

📌 **Example:** If Nifty 50 repeatedly bounces from **18,000**, that level is acting as **support**.

### **How to Identify Strong Support?**
✅ **Multiple Touch Points** – The more times a level is tested, the stronger the support.
✅ **Volume Confirmation** – High buying volume at support confirms strength.
✅ **Psychological Numbers** – Round numbers like **18,000, 20,000** often act as support.

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## **3️⃣ Understanding Resistance**
**Resistance is a level where the price tends to stop rising and reverse downward.**
- It forms when sellers enter the market, creating downward pressure.
- It can be found at previous **highs**, trendlines, or moving averages.
- If a resistance level is broken, it can turn into **new support**.

📌 **Example:** If Bank Nifty struggles to break above **45,000**, that level is acting as **resistance**.

### **How to Identify Strong Resistance?**
✅ **Multiple Rejections** – The more times price fails to break above, the stronger the resistance.
✅ **Volume Confirmation** – High selling volume confirms strong resistance.
✅ **Fibonacci Retracement Levels** – Key levels like **61.8% retracement** act as resistance.

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## **4️⃣ Types of Support & Resistance**

### 🔹 **1. Horizontal Support & Resistance**
These are fixed price levels where past **highs and lows** act as barriers.

✅ **Example:**
- If **Nifty 50 finds support at 17,800** multiple times, that is **horizontal support**.
- If **Reliance struggles to break 2,700**, that is **horizontal resistance**.

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### 🔹 **2. Trendline Support & Resistance**
These are **diagonal levels** drawn by connecting price **highs or lows** in a trend.

✅ **Example:**
- An **ascending trendline** acts as **support** in an uptrend.
- A **descending trendline** acts as **resistance** in a downtrend.

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### 🔹 **3. Moving Average Support & Resistance**
Moving averages like **50 EMA, 200 EMA** act as **dynamic** support/resistance.

✅ **Example:**
- If **Nifty bounces from the 200 EMA**, that is **MA support**.
- If **price gets rejected at the 50 EMA**, that is **MA resistance**.

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### 🔹 **4. Fibonacci Support & Resistance**
Fibonacci retracement levels like **61.8% and 38.2%** act as natural support/resistance zones.

✅ **Example:**
- If **price retraces to 61.8% and bounces**, that is **Fibonacci support**.
- If **price faces rejection at 38.2%**, that is **Fibonacci resistance**.

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## **5️⃣ How to Use Support & Resistance in Trading?**

### 🔹 **1. Trading the Bounce (Reversal Strategy)**
✅ **Buy at Support** → Look for bullish reversal signals.
✅ **Sell at Resistance** → Look for bearish reversal signals.

📌 **Example:**
- If **Nifty forms a bullish engulfing candle at support**, enter a **buy trade**.
- If **Bank Nifty forms a shooting star at resistance**, enter a **sell trade**.

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### 🔹 **2. Breakout Trading Strategy**
✅ **Breakout Above Resistance** → Signals bullish momentum.
✅ **Breakdown Below Support** → Signals bearish momentum.

📌 **Example:**
- If **Reliance breaks above ₹2,700 with high volume**, enter a **buy trade**.
- If **Nifty breaks below 18,000**, enter a **short trade**.

📌 **Tip:** Always wait for **retest confirmation** before entering.

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### 🔹 **3. Support & Resistance with Indicators**
📌 **RSI + Support** → If RSI is **oversold** at support, strong buy signal.
📌 **MACD + Resistance** → If MACD shows bearish divergence at resistance, sell signal.

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## **6️⃣ Live Example: Support & Resistance in Nifty 50**

| **Date** | **Price Level** | **Support/Resistance?** | **Trade Setup** |
|---------|--------------|------------------|---------------|
| Feb 10 | 17,800 | Strong Support | Buy Signal |
| Feb 12 | 18,200 | Resistance | Sell Signal |
| Feb 15 | 18,000 | Support Retest | Buy Signal |

📌 **Observation:**
- **Buying near support** (17,800) gave a profitable long trade.
- **Selling near resistance** (18,200) gave a good short trade.

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## **7️⃣ Mistakes to Avoid in Support & Resistance Trading**
⚠️ **Ignoring Volume** – Confirm breakouts with high volume.
⚠️ **Trading False Breakouts** – Always wait for **retest confirmation**.
⚠️ **Forgetting Stop Loss** – Always set SL below support or above resistance.

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## **Conclusion**
Support and resistance are **key trading concepts** used to find **high-probability trades**. By combining these levels with **candlestick patterns, indicators, and trendlines**, traders can improve their accuracy.

In future lessons, we will cover:
✅ **How to Draw Perfect Support & Resistance Levels**
✅ **Advanced Trading Strategies Using S&R**
✅ **Live Chart Analysis of Support & Resistance**

Stay tuned for more insights!

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🔹 **Disclaimer**: This content is for educational purposes only. *SkyTradingZone* is not SEBI registered, and we do not provide financial or investment advice. Please conduct your own research before making any trading decisions.