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. Zone Of Resistance

    A price zone in which a stock finds resistance and begins to ...
  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

    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.
  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

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

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

    Finding Your Investing Comfort Zone

    Choosing the right investments for you is the best way to feel comfortable with your portfolio.
  7. 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 ...
  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. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center