Zone Of Support

DEFINITION of 'Zone Of Support'

A price zone in which a stock finds support and begins to trade upward once again. In technical analysis, support occurs not at a finite point, but in a zone. The "density" of the zone of support (how far the price can move down 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 support, the higher the point at which actual support will most likely occur.

BREAKING DOWN 'Zone Of Support'

As the price of a security falls toward a zone of support, 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 raise the actual support point within the zone, the chance of the support zone being wiped out is also higher.

When trying to catch the bottom of a retracement, it is imperative that stop-loss orders be used.

RELATED TERMS
  1. Zoning Ordinance

    Written regulations and laws that define how property in specific ...
  2. Enterprise Zone

    A specific geographical area that has been designated by a governmental ...
  3. Volume Of Trade

    The total quantity of futures contracts bought and sold during ...
  4. Adaptive Price Zone - APZ

    A technical indicator that helps investors identify possible ...
  5. Net Volume

    A term in technical analysis that represents a security's uptick ...
  6. Cover On Approach

    The closing out of a profitable short position as the security ...
Related Articles
  1. 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.
  2. Active Trading Fundamentals

    The Psychology Of Support And Resistance Zones

    Emotion drives the market more than you might realize. Find out how psychology affects support and resistance zones.
  3. Chart Advisor

    Can These Top Performing Tech Stocks Keep It Up?

    These tech stocks have been performing very well over the last month and year to date.
  4. Trading Strategies

    Technical Analysis: The Importance Of Volume

    By Cory Janssen, Chad Langager and Casey MurphyTo this point, we've only discussed the price of a security. While price is the primary item of concern in technical analysis, volume is also extremely ...
  5. Technical Indicators

    How To Interpret The Volume Zone Oscillator

    Introduced in 2009, the Volume Zone Oscillator (VZO) is gaining traction with traders and technicians.
  6. Chart Advisor

    Strong Volume Gainers, Can It Continue?

    Volume is one of those indicators that gets overlooked, likely because it's shown by default on almost every chart, making it a little dull. But volume is what drives markets. Big volume jumps ...
  7. 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.
  8. Chart Advisor

    Stocks Pulling Back to a Buy-Zone

    There's an adage: old resistance becomes new support. That's only partially true. Find out why; plus 4 stocks which are likely to respect old resistance.
  9. Technical Indicators

    A Guide To Finding The Most Actively Traded Stocks

    Knowing the trading volume of a stock helps traders understand price movements and forecast future movements. This short guide helps investors locate actively traded data.
  10. Chart Advisor

    4 Relatively Strong Stocks with Volume Increases

    As the market moved down slightly on Tuesday these stocks popped higher on double (or more) the typical volume of the respective stock. For some of these stocks the jump in volume could mean ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. How do I build a profitable strategy when spotting a Rounding Bottom pattern?

    Understand the basics of the rounding bottom pattern, also known as the saucer, including formation and optimal entry and ... Read Answer >>
  5. How should orders be placed when trying to buy a bounce on a stock?

    Buy stocks on a temporary pullback in price to acquire them at a price level that should be profitable when the stock resumes ... 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