Support levels are the areas of the price chart where enough buyers have appeared previously to reverse the downward pressure from the sellers.
This is where you can look at the chart and see that the ‘down’ has stopped and the ‘up’ has begun. It may look different, of course, depending on the time period you are considering.
There is a support level on the hourly chart, another on the daily chart and another on the weekly. Occasionally they are in the same place on the price chart and when this happens it is worth taking a closer look at the action.
The bottom line is that there is likely support where the buyers have previously taken over from the sellers. If this level of support is removed, something has changed.
It’s the same thing but in reverse with resistance levels. These are the places where sellers have taken over from buyers.
Between resistance and support is the trading range and again it all depends on the timeframe. This trading range between the 2 levels can be quite different between the hourly chart and the weekly chart.
It is clear to understand these simple basics of price analysis: you have an idea of the playing field.
Although you’ll never know it from the way some fundamental analysts talk, there’s nothing wrong, mysterious or mystical about it. On the contrary, a price chart analysis like this is more “just the facts” than most other ways of looking at it.
Here is the NASDAQ daily price chart
The index whose components are made up of the once popular big name, big tech stocks, is slipping. Take a look at how the mid-May low – the previous support level – is broken this week.
Friday’s trading session was one action entirely below that level and closed there. So-called “growth” stocks struggle as the Fed begins interest rate hikes.
It is the weekly price chart of the NASDAQ-100:
You can see how the index is going down. It peaked in November/December last year and started heading in the opposite direction. This year’s prior support level at 13000 is most clearly breached on this weekly chart.
Last week’s trade action is clearly below. Many lower levels could be seen as some form of support, but the most obvious is the September 2020 area just above 10,500.
The daily price chart of the S&P 500 looks like this:
The broader S&P 500 index looks a bit better than the NASDAQ-100 in the sense that early-year support seems to be finding buyers. On the other hand, the fact that the price has gone below and barely recovered is not very encouraging. This index needs to move back above 4300 (at least) before a bottom can be said to be in place.
Here is the weekly price chart of the S&P 500:
The large index peaked at the beginning of 2022 just above 4800 and was unable to recover in this area. This week’s challenge to previous support at 4100 is fragile at best. If the selling resumes, the next level where buyers could appear in volume is just above 3700.
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No investment advice. For educational purposes only.