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WHAT IS 'Support (Support Level)'

A support or support level is a financial term that refers to the price level that historically a stock does not fall below. Buyers tend to purchase the stock at this level.

BREAKING DOWN 'Support (Support Level)'

A support or support level is the level at which buyers tend to purchase or enter into a stock. It refers to the stock share price that a company rarely goes below. When a price of stock falls towards its support level, the support level holds and is confirmed, or the stock continues to decline and the support level must change.  

Knowing a support level helps with technical analysis. Fundamental analysis takes a company's performance and history into account to determine the future direction of the stock, whereas technical analysis uses patterns and trends in price. In technical analysis, trend lines demonstrate the prevailing direction of a stock's price by connecting the high and low points on a chart. Analysts then use this line to find channels of support or support level and resistance (or resistance levels) for a specific stock.

Price Levels: Support and Resistance

If the support level is the price that a stock does not go below, the resistance level is the a price point at which a stock has trouble growing past. Think of the the support level as the floor, and the resistance level as the ceiling.

Both resistance and support levels are examples of price levels. Price level is a financial term that refers to any static picture of a stock, like an average of the current value. In the case of a support level, the security experiences its support level when in a downward trend, and it pauses as a result of demand for the stock. Because the downward trend drops the price of the stock, more investors purchase the stock, which stops the stock’s decline. This creates the support level, the number which the stock will not go below.

A resistance level is the opposite of a support level, but is still a category of price levels. As opposed to the support level, resistance level is the price level at which the upward price experiences a stall or is impeded. Resistance levels occur from an overabundant level of supply of a particular stock. Resistance levels commonly occur in the upper levels of range-bound markets and over varying durations. The strength of a resistance level grows the more times the market tries to break through the price and fails.

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