Support and resistance
Also written Support · Resistance · Support level · Resistance level
Price levels where a move tends to pause or reverse — support where demand concentrates and forms a floor, resistance where supply concentrates and forms a ceiling.
In plain language
Support is a price at which buyers have repeatedly appeared in enough size to stop a fall. Resistance is a price at which sellers have repeatedly appeared in enough size to stop a rise.
The reason they exist is memory. People who bought at a level and watched the price fall often sell at break-even when it returns, creating supply at that price. People who watched a level hold and wished they had bought place orders there next time.
How it works
Three properties an analyst is expected to know:
The more times a level is tested, the more significant it is — each test represents real orders that were absorbed at that price.
Once broken, roles reverse. Resistance that is decisively breached tends to act as support afterwards, and support that breaks tends to act as resistance. The buyers who were waiting above are now sitting on a profit and defend the level.
Volume confirms the break. A move through a level on unusually high volume suggests genuine change in supply and demand; the same move on thin volume is often a false breakout that reverses within days.
A worked example
A bank share through a year:
| Period | Behaviour |
|---|---|
| Jan–Mar | Falls to Rs 840 three separate times and bounces each time |
| Apr–Aug | Trades Rs 840–Rs 960; sellers appear near Rs 960 on four occasions |
| Sep | Breaks Rs 960 on volume of 4.2 crore shares against a 90-day average of 1.1 crore |
| Oct | Falls back to Rs 965, holds, and resumes rising |
Rs 840 is support, tested three times. Rs 960 is resistance, tested four times. The September break came on roughly four times average volume, which is the confirmation. In October the old resistance at Rs 960 behaved as support — the role reversal.
A trader using this would place a stop-loss just below Rs 960 after the break, risking about 1% for a position taken because a year's worth of supply had been cleared.
Why NISM asks about it
Chapter 15 (Technical Analysis) covers support and resistance as foundational concepts, with trends, chart patterns and indicators built on them. Expect definitional questions and questions on what happens to a level once it is broken.
Common exam traps
- Support is a floor formed by demand; resistance is a ceiling formed by supply. Reversing the two is the most common error in the chapter.
- Levels are zones, not exact prices. A share that dips Rs 3 below a support and recovers has not broken it.
- Role reversal after a break is the expected behaviour, not an anomaly.
- Support and resistance describe probability, not certainty. Technical analysis assumes price already reflects the fundamentals — it does not claim to know why a level holds.
Where this is taught
Free preparation for NISM Series XVRelated terms
- ChannelTwo parallel trendlines enclosing price — one along the highs, one along the lows.
- Moving averageThe average price of a share over a rolling window, recalculated each session — it smooths away daily noise so that the underlying trend, and changes in it, become visible.
- Primary trendThe dominant long-term movement in a market, typically one year or more — bull, bear or sideways.
- RSIA momentum oscillator scaled 0 to 100 that measures the speed and size of recent price changes — conventionally read as overbought above 70 and oversold below 30.