Support and Resistance Levels

Horizontal price levels where buying or selling has repeatedly halted moves, automatically detected by clustering prior swing pivots and scoring each by how many times price touched it.

Support is a price area where falling prices have repeatedly found buyers; resistance is where rising prices have repeatedly met sellers. Automated support/resistance tools locate these by finding confirmed swing highs and lows (pivots), clustering nearby pivots into candidate levels, and scoring each by its number of touches and surrounding volume — surfacing the few strongest, most-tested lines rather than every minor wiggle. A level's role flips when price decisively breaks through it: broken resistance often becomes support, and vice versa.

The more times price has reversed at a level, and the more volume transacted there, the more significant it is — a four-touch level is far more meaningful than a one-touch line. Traders watch these levels for reactions: bounces (range trades) or breaks (breakout and breakdown trades, ideally on rising volume). A level's strength is best read as a probability of reaction, not a wall; the operative question is always whether price respects or breaks it.

Horizontal support and resistance is some of the most widely watched information on a chart, which lends it a self-fulfilling reliability — enough participants act on the same obvious levels to make reactions occur. Automated detection improves consistency over hand-drawn lines by removing subjective bias, but it is sensitive to the pivot-sensitivity setting: too tight and it finds noise, too loose and it misses levels. Levels are descriptive, not predictive — they tell you where a reaction is likely, not which way price will ultimately resolve. They are most reliable when they coincide with other evidence (a volume node, a round number, a moving average) — that is, at points of confluence.

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.