How to Use Support and Resistance on Stock Charts
Support and resistance are two of the most important concepts in technical analysis. These levels act as psychological barriers on a stock chart, helping Indian traders decide when to enter or exit a position. Whether you’re trading intraday on NSE or investing long-term, mastering support and resistance will enhance your market timing and reduce risk.
What Is Support?
Support is a price level where a stock tends to stop falling and may start rising. It represents demand—a zone where buyers step in.
Example: If Infosys repeatedly bounces back near ₹1,400, then ₹1,400 is a support level.
Why it works: Traders expect price to bounce from this zone again, creating buying pressure.
What Is Resistance?
Resistance is a price level where a stock tends to stop rising and may start falling. It indicates supply—a zone where sellers take control.
Example: If Reliance struggles to move above ₹2,600 several times, then ₹2,600 is a resistance level.
Why it works: Traders anticipate profit-taking or selling pressure near this zone.
How to Identify Support and Resistance Levels
- Historical Price Reactions
- Look for areas where price reversed multiple times in the past.
- Round Numbers
- Prices like ₹500, ₹1,000, ₹2,000 often act as psychological support or resistance.
- Moving Averages
- The 50-day or 200-day moving average often acts as dynamic support or resistance.
- Trendlines and Channels
- Uptrend and downtrend lines connect swing highs and lows to show angled support/resistance.
- Volume Analysis
- High volume near a price level adds credibility to that zone.
Using Support and Resistance in Trading
Buy Near Support
- Look for bullish reversal patterns (like hammer or bullish engulfing) near support zones.
Sell Near Resistance
- Consider booking profits or entering short positions when price nears resistance with reversal signs.
Breakouts and Retests
- If price breaks above resistance, that resistance may become new support.
- If price breaks below support, that support may become new resistance.
Tip: Wait for a retest before entering breakout trades to reduce false signals.
Examples in the Indian Market
- Tata Motors: If the stock keeps bouncing from ₹600, that’s a key support.
- HDFC Bank: Struggles repeatedly at ₹1,700, making it strong resistance.
- Nifty 50 Index: Support near round numbers like 19,000 or 18,500 often leads to rallies.
Mistakes to Avoid
- Using only one timeframe: Check multiple timeframes for confirmation.
- Expecting exact levels: Treat support/resistance as zones, not precise points.
- Ignoring volume: Breakouts without volume may fail.
- Over-relying on past levels: Market conditions change, so always reassess key zones.
Tools to Draw Support and Resistance
- TradingView India: Use the horizontal line tool to mark levels.
- Chartink: Scan stocks nearing support or resistance with filters.
- Zerodha Kite: Simple charting interface to plot price zones manually.
Conclusion
Support and resistance form the foundation of technical analysis for Indian traders. They help you understand where buying or selling pressure is likely to appear, improving your trade entries and exits. By practicing on real charts and combining with candlestick patterns or indicators, you can confidently trade key levels in any market condition.
FAQs
Q1. Can support and resistance be used in intraday trading?
Yes, they are highly effective in intraday trading when plotted on 5 or 15-minute charts.
Q2. Do support and resistance levels change over time?
Yes, they can shift based on market activity, news, or price breakouts.
Q3. How reliable are support and resistance zones?
They are reliable when confirmed with other signals like volume, candlestick patterns, or indicators.
Q4. Can moving averages act as support or resistance?
Yes, dynamic levels like the 50-day or 200-day moving average often act as support/resistance.
Q5. How many times should a level be tested to be valid?
Typically, 2–3 touches with price reversal validate the strength of a level.