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Postman Sunday Gyan
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Postman Sunday Gyan

Following our moto to spread financial literacy that we will sharing small concepts with you on Technical, Derivatives Analysis. We are starting it from today!

The two most important terms in Technical Analysis, Chart Study are as follows :-

1) Support
2) Resistance

Support

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. It is a level at which buyers tend to enter the stock. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. If the price of a stock falls toward a support level, it is a test for the stock the support is either confirmed or eradicated.

E.g – Recently Nifty IT (Index of All IT Companies) has risen/couldn’t break the levels of 15250-15300, hence 15250 is a strong support for Nifty IT. If Nifty IT breaks 15250 then it will be a sign of worry for bulls as Nifty IT will go lower.

Resistance

Resistance is that price level at which selling is thought to be strong enough to prevent the price from rising further. Resistance in technical analysis is a price level that a rising stock can’t seem to overcome. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance. Resistance levels are characteristically found at the upper levels of range bound markets.

E.g – Recently Nifty has fallen/couldn’t cross the levels of 11540-11550, hence 11550 is a strong resistance for Nifty. If Nifty breaks 11550 then it will be a sign of worry for bears as Nifty will go higher.

Summary

Support is broken – Breakdown (We go Short)!

Resistance is broken – Breakout (We go Long)!

Knowledge Sharing is Caring – We would request you to share the above content with atleast 10 people as our motto is to educate maximum individuals on Technical Analysis, Chart Reading and Derivative Data Analysis etc.

Learn as well as earn!

About Yash Dugar

Yash Dugar
Yash is a passionate entrepreneur who is the Founder of Investment Research firm named CREALTH RESEARCH! Being a NISM Certified Investment Advisor he has done GFMP course from BSE Institute and a CFP in making. He has also been the curator of TEDxBESC & is a die heart social worker actively working with two NGO's namely Yahvi & Tiljala Shed. Can be reached at [email protected]

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