Technical Glossary / Support, Resistance & Price Levels
Resistance
A price area where rallies have stalled because supply showed up.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
Resistance is a price where selling has been strong enough to stop or reverse a rally. Prior highs, bases that broke down, moving averages, and round numbers are typical sources. It is observed supply, not a ceiling with a guarantee.
How to identify it
Two or more rejections from the same area, with closes back below. The zone is the cluster of highs, not the single highest wick, unless you have decided that wicks are your rule.
Bullish reading
A close through resistance can become support on the retest. Buying the first touch of a widely watched high, before the close, is how traders buy the top of a range.
Bearish reading
In a downtrend, resistance holding on a rally is the short location. Risk goes beyond the zone.
Common mistakes
Shorting a resistance level in a strong uptrend without a rejection, only because the line exists.
Limitations
Resistance breaks in trends. A level that stopped three rallies can fail on the fourth when the trend is strong. Have an invalidation above it.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.