What is Support and Resistance?

When examining financial instruments, support and resistance levels are two important concepts for the technical analysis we perform with price charts that are assumed to reflect all factors affecting the buyer and seller. When examining price charts, the levels followed in cases where the price rise or fall of the relevant investment instrument slows down or gets stuck within the examined period are called support and resistance points.

WHAT IS THE SUPPORT LEVEL?

In summary, the answers to the question of what are support and resistance levels are as follows: *Support level; It refers to the level at which the sellers are reluctant for an investment instrument whose price has been falling in the examined period, and the buyers are willing to buy at the relevant level, so the decline loses momentum.

WHAT IS THE RESISTANCE LEVEL?

Resistance level; For an investment instrument whose price is rising, it represents the point at which the rise slows down, buyers are reluctant and sellers are more willing. *Technical analysis; It is carried out based on past price movements of stocks, foreign exchange rates or other financial instruments. Therefore, when determining support and resistance levels, the levels where the price peaks and bottoms within a certain period are examined. Support and resistance levels; It is determined by combining the bottom and top points of the investment instrument in the relevant period. In order to understand whether the support or resistance level has been broken, the closing in the relevant period should be monitored.

WHAT DOES THE BREAKING OF THE SUPPORT AND RESISTANCE LEVEL MEAN?

In order for a support level to be broken, the relevant financial instrument must have closed below that level at least once. A similar situation applies for a resistance level to be considered broken; closing above the previously determined resistance level at least once means that the relevant level has been broken. Of course, in some cases, even if the price closes once, breaking the support or resistance level, it may return to the support or resistance level again, and one should be cautious against such misleading pricing. On the other hand, when a support level is broken, that level becomes resistance, and when a resistance level is broken, the relevant level becomes support.

WHAT SHOULD BE CONSIDERED WHEN MAKING A TECHNICAL ANALYSIS?

In some cases, support and resistance levels cannot be broken even though they have been tested many times, while in some cases, it is possible to pass the relevant levels more easily. Therefore, support and resistance levels are not exact numbers and should be revised from time to time and should not be assumed as a stand-alone indicator. In this context, the points that investors should consider when investing according to support and resistance levels are; Since the technical analysis method is based on past price movements, it can be summarized as preferring relatively long periods such as daily weekly rather than intraday short term and taking into account the characteristics of the investment instrument being analyzed such as volatility and volume.