What is Support?
In technical trading analysis, support is a lower limit in ain which a security’s price tends to stay.
How Does Support Work?
Price channels can slope up (indicating bullish sentiment) or down (indicating bearish sentiment); they don’t have to simply go “sideways.” The important geometric characteristic is that the resistance lines (which are the opposite of support lines; they are the upper limits of the ) and support lines are parallel, as shown in this price channel for ChevronTexaco (CVX). The channel lines themselves are often based on multiday moving averages or logarithmic scales that reflect price movements in percentage terms. However, technical trading is as much an art as it is a science, and so one technical trader’s price channel might be different from another’s.
When a stock’s price touches or goes below the support, this may signal a trend change, which is why the support level is very important to technical traders.
Why Does Support Matter?
Price channels help tip traders off about trend changes in a stock hits the support level of an upward-sloping price channel; similarly, traders hope to be already out of a stock before it hits the support level on a downward-sloping price channel.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
I think it's one of the market's biggest missed opportunities. Every day, millions of U.S. investors are missing out on the world's highest-yielding securities. That's because the vast...Read More →
Many parents want to get a jump-start on college savings, and the smartest strategy depends on a family's own financial situation. Whether you can afford to set aside $25 per month or $28,000 per...Read More →
Winning stock pickers share a few common strategies. We all like to scrutinize companies'...Read More →
Ever wonder why that house on your street is just sitting there, making the neighborhood look crummy? You're not alone. Every month, there are hundreds of thousands of home foreclosures...Read More →