Support and resistance are where the crowd changes its mind.
What you will learn
Identify support and resistance
Read moving averages and trends
Understand why these levels work
Reading price action
Reading price action
Following the trend
Following the trend
Support and resistance
Support is a price level where buying tends to emerge and halt a decline. Resistance is where selling tends to emerge and halt a rise. They're not lines of steel — they're zones where many market participants have placed orders, memories of value, and stop-losses.
💡 Why levels work
If a stock bounced at $50 three times, buyers remember $50 as 'cheap' and sellers who missed out see it as a buying opportunity. The level becomes self-reinforcing — until it breaks, at which point the psychology inverts (support becomes resistance).
The trend is your friend
A trend is a series of higher highs and higher lows (up), or lower highs and lower lows (down). Trading with the trend means buying pullbacks in uptrends rather than fighting them. Most losses come from trading against the trend.
Moving averages
A moving average smooths price into a single line showing the average over N periods (e.g., 50-day, 200-day). Price above the MA = uptrend bias; below = downtrend. The 50/200 'golden cross' and 'death cross' are classic trend-change signals.
💡 Reading the 200-day
Institutions watch the 200-day MA closely. Price holding above it signals a healthy uptrend; a decisive break below it often marks a regime change. It's a slow, lagging indicator — but lag is the point: it filters noise and shows the dominant trend.
Support/resistance + trend together
Real skill is combining them: trade pullbacks to support in the direction of the trend. That confluence — a trend-aligned level — is where high-probability setups live. A level against the trend is a much lower-quality trade.
❓ Quick check
An uptrend is defined by:
A) Higher highs and higher lows
B) Lower highs and lower lows
C) Flat price
D) High volume only
Higher highs + higher lows.
(Knowledge check — full exam is next)
Key takeaways
Support/resistance = zones where the crowd's mind changes
Trend = higher highs/lows (up) or lower highs/lows (down)
Best setups = trend-aligned levels (confluence)
📝 Weekly Exam — pass with 80% to unlock next week
10 questions. Review the Deep Dive and courses before attempting.
1. Support is a level where:
Buyers step in at support.
2. Resistance is a level where:
Sellers step in at resistance.
3. An uptrend is a series of:
HH + HL.
4. A moving average's main purpose is to:
It filters noise.
5. The 'golden cross' is when:
50 above 200 = bullish signal.
6. When support breaks, it often becomes:
Broken support flips to resistance.
7. Most losses come from trading:
Fighting the trend.
8. A 'zone' rather than a 'line' means:
Levels are fuzzy zones.
9. A high-probability setup combines:
Confluence of level + trend.
10. Price above its 200-day MA generally signals:
Above the long-term MA = bullish bias.
Your score: —
🛠 Weekly Project
Mark support/resistance and trend on one chart.
1
Open a daily chart of any liquid asset.
2
Draw 2-3 horizontal support/resistance zones.
3
Add a 50-day and 200-day MA and note the trend.
4
Write 2 sentences on where you'd look to enter (trend-aligned level) and why.