Definition
Support is a price zone where declines have repeatedly slowed or reversed, and resistance is a zone where advances have repeatedly stalled. Both are drawn from past turning points and describe where trading activity previously changed direction.
How it works
Analysts mark these zones using earlier highs and lows, round numbers or heavily traded areas. The more often and the more recently a zone has been tested, the more attention it tends to receive, although each retest can also weaken it. Zones are better treated as bands than as exact lines.
When price closes decisively through a zone, the broken level is often watched in the opposite role: former resistance may be treated as support, and the reverse. “Decisively” has no standard definition; some analysts use a close beyond the zone, others a percentage or volatility filter.
Illustrative example
Illustrative: a fictional share has turned up three times between HK$24.80 and HK$25.20 over six months, so its support zone is HK$0.40 wide, or 1.6% of HK$25.00. A close at HK$24.10 is HK$0.70 below the zone's lower edge, which an analyst using a close-outside-the-zone rule would label a breakdown, although the label is a convention rather than proof.
What to watch for
Support and resistance are drawn after the fact, so two analysts can mark different levels on the same chart, and levels often fail without warning. Orders tend to cluster at obvious levels, so fills there can be poor (slippage) and false breakouts are common.