Trends, Support and Resistance
In technical analysis, a trend is the broad direction a price has been moving over a period of time. An uptrend is a series of higher highs and higher lows. A downtrend is a series of lower highs and lower lows. Sideways markets move between two price levels without a clear directional bias. Trends can last days, weeks, months, or years, and they often persist longer than most people expect, because the momentum driving them tends to be self-reinforcing—a stock in an uptrend attracts buyers who want to ride the move, which pushes it up further.
Support is a price level where buyers have repeatedly stepped in to prevent further declines. Resistance is the opposite—a level where sellers have stepped in to cap upside. These levels are not magical; they exist because many traders remember the same price, placed orders around it, and act when price approaches it again. A level becomes stronger (more significant) if it has been tested multiple times without breaking.
When support breaks decisively (price closes below it on heavy volume), it often becomes resistance on the bounce back. This is because traders who bought at that level now have a chance to exit at breakeven, and they do—turning a level from demand into supply. Understanding these role reversals helps explain why stocks often bounce off a broken support level before continuing down.
Trendlines connect the lows of an uptrend (or the highs of a downtrend) and can be used as dynamic support or resistance. A break of the trendline is often interpreted as a signal that the trend has ended and a reversal might be beginning. But false breaks are common—price will sometimes spike through a trendline on one or two candles, then reverse back, shaking out traders who were too quick to abandon their bullish or bearish conviction.
- Trends are self-reinforcing until they reverse.
- Support and resistance exist because of memory and positioning.
- A broken level often reverses its role (support → resistance).
- Trends outlast most traders' patience; don't underestimate persistence.