Support

A price level where buying interest has historically been strong enough to prevent further decline — acting as a floor that the price has repeatedly bounced off.

Support levels are identified by looking at a price chart and noting price levels where the stock has previously stopped falling and reversed. These levels are significant because they represent points where buyers have consistently overwhelmed sellers. When price approaches a known support level again, technical traders anticipate a similar outcome — increased buying pressure — and position accordingly.

Support can originate from various sources: previous price lows, horizontal levels where the stock has bounced multiple times, moving averages (particularly the 50-day and 200-day), Fibonacci retracement levels, round numbers (which attract attention psychologically), or the top of a previous consolidation range (which becomes support once cleared — "prior resistance becomes support").

The most critical characteristic of support is whether it holds or breaks. A break below well-established support is a bearish signal — it means buyers who had been stepping in at that level have been overwhelmed, suggesting a significant shift in supply/demand dynamics. Broken support often then becomes resistance — former buyers who are now underwater use any recovery to that level as an opportunity to exit at breakeven.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.