Support levels are those areas on the price chart where enough buyers showed up previously to reverse the downward pressure of sellers.
It’s where you can look at the chart and see that “down” stopped and “up” began. It may look different, of course, depending on which time frame you’re looking at.
There’s a support level on the hourly chart, another one on the daily chart and another one on the weekly. Every once in awhile, they’re at the same place on the price chart and when that happens, it’s worth considering a closer look at the action.
The main thing is: there’s likely support where buyers previously took over from sellers. If that support level is taken out, something has changed.
It’s the same thing but upside down with resistance levels. Those are the spots where sellers took over from buyers.
Between resistance and support is the trading range and again, it all depends on the time frame. That range of trading between the 2 levels may be quite different between the hourly chart and the weekly chart.
It’s clarifying to understand these simple basics of price analysis: you get a sense of the playing field.
Although you’d never know it from the way some fundamental analysts talk, there’s nothing phony, mysterious or mystical about it. On the contrary, price chart analysis like this is more “just the facts” than most other ways of looking at it.
Here’s the daily price chart for the NASDAQ
The index whose components consist of the formerly hot big name, big tech stocks is slip sliding away. Take a look at how the mid-May low — the previous support level — is broken this week.
Friday’s trading session consisted of action entirely below that level and closed there. So-called “growth” stocks are having trouble as the Fed begins the interest rate hikes.
This is the weekly price chart of the NASDAQ-100:
You can see how the index is down trending. It peaked in November/December last year and started heading in the opposite direction. This year’s earlier support level at 13000 is more clearly violated on this weekly chart.
Last week’s trading action is clearly below it. A lot of lower levels could be considered as some form of support, but the most obvious is the September, 2020 area just above 10,500.
The S&P 500 daily price chart looks like this:
The wider S&P 500 index looks a little better than the NASDAQ-100 in the sense that the earlier-in-the-year support seems to be finding buyers. On the other hand, that the price has dipped below it and then just barely recovered is not all that encouraging. This index needs to rally back above 4300 (at least) before it could be said that a bottom is in place.
Here’s the weekly price chart for the S&P 500:
The big index peaked in early 2022 at just above 4800 and has been unable to mount a rally back to that area. This week’s challenge of the previous support at 4100 is shaky at best. If the selling kicks in again, the next level where buyers might show up in volume is down there at just above 3700.
For more extensive charts and analysis, please visit my website right here:
Not investment advice. For educational purposes only.
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