Figure 4: Example of support and resistance levels

Support and resistance are very important concepts in technical analysis. While it is easy to understand, its application is usually not so straight-forward owing to the many support and resistance lines that can be drawn on any given chart. On the price chart, we will emphasize on lines that have more contact points with the price structure. Another important point to note is that a resistance line which was providing resistance to price movement will provide support if this level is broken. Conversely a support line will become a resistance line once it is broken. This is illustrated in Figure 4.