Ask the Institute

DATE:  August 27, 2012

QUESTION:

Can you discuss the terms "support" and "resistance," which are used by traders who study stock charts as part of their decision-making methodology?

ANSWER:
Support and resistance refer to boundaries or limits on stock charts where prices tend to reverse and move in the opposite direction. The first term, "support," describes a relatively low price level where stock prices tend to stop declining and subsequently trade higher. The second term "resistance," is the opposite of support. Resistance describes a relatively high price level where stock prices tend to stop rising and subsequently trade lower. To learn more about "support" and "resistance," view this week's segment of "Ask the Institute."