Quick Answer
Support is a price level below the current market where buying halts a decline, acting as a floor. Resistance is a level above the market where selling halts an advance, acting as a ceiling. When a level is decisively broken, its role reverses: broken support becomes resistance, and broken resistance becomes support.
Two ideas do the work here: which level sits below the market and which sits above, and what a level becomes once price breaks through it.
Support: The Floor Below
Support is a price level below the current market where buying interest is strong enough to halt a decline.
- It acts as a floor under the market.
- Support often forms at prior lows, because a market moving down tends to find buyers again where it found them before.
Resistance: The Ceiling Above
Resistance is a price level above the current market where selling interest is strong enough to halt an advance.
- It acts as a ceiling over the market.
- Resistance often forms at prior highs, because a market moving up tends to meet sellers again where it stalled before.
Think of it this way: support is the floor below your feet and resistance is the ceiling over your head. Price bounces up off the floor and gets pushed back down from the ceiling, drifting between the two until it breaks through one of them.
Exam Tip: Gotchas
- Support is BELOW the market; resistance is ABOVE it. Do not flip them. A decline is halted from underneath (support); an advance is halted from above (resistance).
Role Reversal: The Flip
Once a support or resistance level is decisively broken, its role reverses.
- Broken support becomes resistance: after price breaks down through a floor, that old floor tends to cap the next rally back up.
- Broken resistance becomes support: after price breaks up through a ceiling, that old ceiling tends to hold the next pullback.
- Levels are best treated as zones, not exact prices, since price may overshoot slightly before reacting.
Think of it this way: break through the floor and you land in the room below, where that same surface is now the ceiling over your head. The price you fell through is still a barrier; it just switched from holding you up to holding you down.
Exam Tip: Gotchas
- A broken level flips its role. After price breaks DOWN through support, that former support becomes RESISTANCE on the way back up (and a broken resistance becomes support). A question that breaks a level and then asks what it becomes is testing role reversal.
Memory Aid: Support Sits below (the floor); Resistance Rises above (the ceiling). Break one and the two trade places.