Updated on March 8, 2023
Resistance is a technical analysis concept, which is the opposite of support level. Resistance is the maximum price point which a stock hits and is not expected to rise any further. The number of sellers at resistance levels are higher than the buyers. Traders look for resistance levels closely to benefit from buying at around support levels and sell at resistance levels. Breakout happens beyond the resistance level, supported by an increase in trading volumes and a new price point or support level is formed.
How to use Resistance levels in trading?
Resistance is a key indicator used by traders. Some features of Resistance are:
a) Resistance price will be above the market price of a stock
b) At resistance level, selling in a stock increases which leads to price stabilisation and thus prevents the stock price from unlimited price rise
c) After a stock reaches resistance level, sellers outnumber buyers and thus this price becomes the new support level