Zone Of Resistance

DEFINITION of 'Zone Of Resistance'

A price zone in which a stock finds resistance and begins to trade downward. In technical analysis, that support occurs not at a finite point, but in a zone. The "density" of the zone of resistance (how far up the price can move through it), depends on the volume of trading as the price approaches and enters the zone. The higher the volume of trading in the zone of resistance, the lower the point at which the actual resistance will most likely occur.

BREAKING DOWN 'Zone Of Resistance'

As the price of a security climbs toward a zone of resistance, it is a test: how far the price moves down through the zone will be an important indicator for future attempts to pass through it.

It is important to note that even though higher volume can lower the actual resistance point within the zone, the chance of the resistance zone being wiped out is also higher. When trying to pick the top of a retracement, it is imperative that stop-loss orders be used.

RELATED TERMS
  1. Zone Of Support

    A price zone in which a stock finds support and begins to trade ...
  2. Zoning Ordinance

    Written regulations and laws that define how property in specific ...
  3. Combat Zone

    An area designated as a war zone during a specified period. Members ...
  4. Enterprise Zone

    A specific geographical area that has been designated by a governmental ...
  5. Zoning

    Municipal or local government laws that dictate how real property ...
  6. Planned Urban Development - PUD

    A type of community zoning classification that is planned and ...
Related Articles
  1. Active Trading Fundamentals

    Playing It Safe With Trades? Or Holding Yourself Back?

    Fear of breaking out of a comfort zone can prevent an investor from reaching his or her full potential.
  2. Entrepreneurship

    Zoning Laws for Home Based Businesses

    Understand what types of home-based businesses are allowed and what types of businesses aren't allowed. Learn what to do to ensure zoning compliance.
  3. Chart Advisor

    Major Bank Stocks Likely to Correct (BAC, WFC)

    These banking stocks have been rallying for a couple of months, but could correct as they hit significant resistance in the longer-term downtrend.
  4. Active Trading Fundamentals

    Trade On Support For The Best Exit Strategy

    Find your sound exit strategy based on support and resistance levels, while understanding the psychology behind them.
  5. Chart Advisor

    Trending Stocks Near the Buy Zone (FSLR, HRL)

    These trending stocks have recently pulled back, providing a potential buying opportunity. Here's some trades to consider.
  6. Chart Advisor

    Buy These Stocks During the Current Pullback (PCLN, RAI)

    Based on the rising trend channels, these stocks have pulled back into a buy zone.
  7. Options & Futures

    Finding Your Investing Comfort Zone

    Choosing the right investments for you is the best way to feel comfortable with your portfolio.
  8. Technical Indicators

    How To Interpret The Volume Zone Oscillator

    Introduced in 2009, the Volume Zone Oscillator (VZO) is gaining traction with traders and technicians.
  9. Charts & Patterns

    How To Use Volume To Improve Your Trading

    The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.
  10. Options & Futures

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
RELATED FAQS
  1. What are the best ways to identify Retracements on a stock?

    Read about three of the most common methods for identifying retracement levels on a stock's price chart, including the controversial ... Read Answer >>
  2. Why is the Uptick Volume important for traders and analysts?

    Find out why technical analysts and traders keep track of uptick volume to better assess the momentum of a stock's price ... Read Answer >>
  3. Are there special benefits for U.S. armed forces personnel?

    If you are a member of the military, you may be afforded special tax benefits that might not be available to other taxpayers. ... Read Answer >>
  4. What is the Uptick Volume formula and how is it calculated?

    Learn more about uptick volume, a measurement of the number of trades that take place during a time when an asset's price ... Read Answer >>
  5. Why is trading volume important to investors?

    Learn about trading volume, its importance and how investors analyze volume to confirm a trend or reversal in a security. Read Answer >>
  6. How do I use Fibonacci Clusters for creating a forex trading strategy?

    Find out how traders in the forex market can implement Fibonacci cluster analysis with their currency pairs to identify areas ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center