Resistances & Supports are often used terms by traders during their market forecast using technical analysis. But what are they? Let me explain.
Support: It is the price which the perceived demand for the stock is high which may prevent the stock from falling. So when a stock has fallen to near its support levels it is likely that there will be demand from buyers. You could think of support levels as a floor. It is also important to note that sellers are less likely to sell if the stock price is trading near its support level for the same reason mentioned above. If the stock price holds the support level and prices go up, it proves that the bulls are in control and if it happens to break the support levels it means that there is an excess supply of stock due to selling pressure and bears are in control.
Resistance: Is the price range that owners of stocks perceive will not be breached. Think of it as a perceived ceiling which investors and traders think will not be breached in the foreseeable future. When a stock price approaches resistance levels, traders are less likely to buy as the upside potential seems limited because other traders who own the stock may start selling as the price point approaches to realize their profits.
Having said that, these support and resistance levels may not necessarily hold. If it came true all the time, stock markets would be a very predictable ball game for all traders. It involves some skill in determining:
• Which are the support and resistance levels
• Which are the important support and resistances
• What are the chances that they will hold
Technical analysis is an art of researching the demand and supply of stocks and to accurately forecast its future performance. So there is an element of uncertainty and variation in approaches. There are several ways of determining support and resistances of stocks. For instance, when there is a trading range in a stock, the lower end of the range is considered its support and the upper end is the resistance. There are several other ways of doing it. Here I will be explaining a more definite measure of support and resistances to help you use it efficiently for technical analysis and trading.
The calculation methodology uses the High, Low and Close price of the previous day to arrive at support and resistance for today. So the levels keep changing on a daily basis. In total there are 3 different ways of calculating Support and Resistances:
On Fyers One, we have used the Classic calculation methodology. If you want to use Woodie’s or Camarilla levels, we recommend you use pivot point calculator on our website. You can get all the support and resistance levels. They are:
• S1, S2, S3 & S4
• R1, R2, R3 & R4
To access the tool, Click on “Tools” and select R and S Symbols Watch.
You will arrive at this window which will filter stocks that have either breached their support or resistance levels. As you can see, that you can get to know:
• Resistance Level 1
• Support Level 1
• Resistance Level 2
• Support Level 2
• Pivot points
The bullish stocks which have breached resistance levels are displayed above and the colour codes are given accordingly. Whereas the stocks which have broken support levels are shown below the horizontal divider and similar bearish colour codes are given so that it is visually easy for traders to find out which stocks are most bullish and which are very bearish. In the above screenshot, you can see that the stocks are filtered from NIFTY 50 index and Adani Ports has breached R1 and R2 and is currently trading at 241.25. This Support and resistance feature makes life in trading much faster and efficient. Imagine how you would come to a bullish list of stocks within Nifty 50? It would become practically impossible for traders to identify this data manually. Even if you create a tool, it’s a hassle in comparison to the features you can get on our in-house platform. The advantage of such real-time data is very valuable for active intraday trading or a swing trader who understands that, Time is Money in our field.
You can also select other indices through which you want to run these filters. In the previous screenshot, we took Nifty as an example but you could choose from over 30 indices like Bank Nifty, Nifty 100, Nifty Energy, Nifty FMCG, Nifty Infra etc.
Another great feature is that you can get Support and Resistance levels for 3 different timeframes:
This adds flexibility and versatility to your technical analysis of stocks as traders with longer timeframes can toggle between daily, weekly and monthly filters to further shortlist stocks and make more informed trading decisions.
You can directly BUY or SELL from the Support and Resistance window itself. You don’t have to add stocks to your watch lists, close this window and then re-open watch lists to place an order. By using Fyers One, you can save those extra few moments which determine a good entry or exit price in a trade. All you have to do is:
• Press F1 to BUY
• Press F2 to SELL
You can also get these levels on the technical charts if you click on the icon showed in the image above. The figures shown here will be the same as the ones you’ll see in the Support and Resistance window.
You get an order entry window through which you can complete your trade without wasting any precious time. At Fyers, we focus on giving traders that extra edge that can contribute to your trading success. Fyers One is a unique trading platform in India that includes many other features that intraday and positional traders will find extremely useful to make profits. Do let us know if you have any queries.
Tejas is the Co-Founder & CEO at FYERS, the youngest team to get NSE’s broker license. He has a specialization in finance and has over 10 years of work experience spanning across proprietary trading, risk management, and broking. Tejas & his team started FYERS, a technology-focused brokerage as a mission to transform the trading/investment landscape in India.