What are support and resistance?
Support and resistance are key concepts in technical analysis. We’ll discuss support and resistance in this part of the series.
The above chart shows support and resistance levels for Intel Corp. (INTC).
In technical analysis, a straight line that connects three or more of a stock’s data points is called a support. The nearest support is just below the stock’s current market price.
Support is the point where buying pressure is more than the selling pressure—demand is greater than the supply. Support is the psychological point where traders are willing to buy on the expectation that the stock price won’t drop more.
In technical analysis, a straight line that connects three or more of a stock’s data points is called a resistance. The nearest resistance line is just above the stock’s current market price.
Resistance is the point where selling pressure is more than the buying pressure—supply is greater than the demand. Resistance is the psychological point where traders are willing to sell with the expectation that the stock price won’t increase more.
Applying support and resistance concepts
Support and resistance concepts can be applied to stocks like Hess Corp. (HES), Occidental Petroleum (OXY), Murphy Oil (MUR), and Chevron Corp. (CVX). These oil stocks are part of energy exchange-traded funds (or ETFs) like the iShares U.S. Energy ETF (IYE) and the Energy Select Sector SPDR ETF (XLE).