As we mentioned in the topic of equilibrium price, knowing the levels of resistance and support will help technical analysts to identify the appropriate entry and exit points from transactions.  Now we will first introduce support points and then support levels. For additional information, we suggest you read the technical analysis training article.

Support points

When the price reaches a level where the desire to buy is strong among traders and most of them believe in a price increase, near this range the buying pressure increases and overcomes the selling pressure. Sellers are no longer willing to offer their shares below these levels, and buying shares near these points becomes valuable. As a result, the control of the prices will be in the hands of the buyers and the price will not go below these points. These points are called support points.

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The support points are shown in the figure above. As you can see, the price starts to increase near these points due to demand oversupply.

In the chart below belonging to the Thanosa symbol in the daily time frame, you can also see that the price has started to increase near the support points. Traders expect price increase in this range; Therefore, the pressure of buyers increases and as a result, the price increases.

Support levels

Support levels emerge from the joining of support points at a price level. The points to which the price reacts are recorded in the traders’ memory and based on this, they buy and sell the stocks they want. In this way, after a price support level is formed and if the price approaches this level again, it acts like a barrier and prevents the price from falling further.

Therefore, the price will grow many times after approaching these levels. For this reason, the previous support levels that have affected the price can play a role of strong support in the future, and marking these levels as reversal points helps the trader in determining buying ranges.

◊  Also read this article: Basic analysis training from zero to hundred

In the chart below belonging to the Khagstar symbol in the 4-hour period, we have identified the support levels to which the price has reacted many times. Based on traders’ memory, we expect prices to react to these price levels and rise again after forming the first support level.

As you can see, prices have increased most of the time when approaching these levels. Therefore, identifying these levels will show traders the potential buying ranges.

Note:  As mentioned in the topic of price return, to enter the transaction, in addition to specifying the return points, we also need to issue a confirmation; After identifying the return points, we must first notice that we are in the direction of the trend and then wait for the break of a resistance or another support area so that we can enter the transaction.

In the next three charts belonging to the Khagstar symbol in the daily time frame, we have determined the appropriate buying ranges related to the previous chart.

As you can see in the chart below, after detecting a support level to enter a buy trade, as mentioned in the topic of trend lines, a bullish abc should issue a warning of the start of a bullish trend. After forming the bullish abc, you can enter the purchase transaction when the confirmation of the bullish trend is issued; In such a way that the price breaks the blue downward resistance line, which indicates a short-term downward correction, and a candle closes above it.

In the chart below, after recognizing the red support levels, we should wait for confirmation to enter the purchase transaction. Therefore, after the blue bearish levels are broken and the candlestick stabilizes above it, a buy trade can be entered.

Remember that the capital market has behavior based on the psychology of traders and is not based on inflexible mechanical rules; In such a way that it does not react exactly on a line or a point and reacts to a range. Therefore, it is better to consider a range as resistance and support levels instead of a line. To identify support zones, we often consider candlestick price floors as support zones.

◊  Also read this article: Free price action training from zero to one hundred

In the chart below belonging to the Apardaz symbol in the 4-hour period, we have marked the support ranges in red. Therefore, after the formation of a bullish abc, which is a warning for the beginning of an upward trend, you can enter a buy deal when the price breaks the blue falling resistance lines, which are short-term corrections, and a candle closes above it.

In the chart below belonging to the Rakish symbol on the weekly time frame, we have marked the support area in red. In this chart, after the formation of an ascending abc, which is considered a warning for the beginning of an upward trend, you can enter a buy transaction when the price breaks the blue descending resistance lines and a candle closes above it.

In the following chart related to the drilling symbol, we have marked the support ranges in red. In this chart, after the formation of an ascending abc, which is considered a warning for the beginning of an upward trend, you can enter a buy transaction when the price breaks the blue descending resistance lines and a candle closes above it.

Conclusion

Support levels are formed from the joining of support points (in which the tendency to buy shares increases) at a price level. Knowing support levels and resistance levels can help technical analysts to identify the appropriate entry and exit points for transactions.