Support

Price level where buying interest is strong enough to halt a decline.

Support is a price level where a stock or other asset has historically struggled to fall below. In technical analysis, it represents a concentration of demand or buying interest. As the price of an asset drops toward this level, buyers become more inclined to buy, and sellers become less inclined to sell, which temporarily halts the downward trend and can even reverse it. Traders identify support levels by looking at historical price charts and finding points where the price has repeatedly bounced upward after a decline. These levels are not exact numbers but are generally treated as zones. Support can also be established by psychological round numbers, such as $50 or $100, or by technical indicators like key moving averages. Investors and traders care about support because it helps them manage risk and make entry decisions. Buying near a support level allows a trader to place a tight stop-loss order just below that level, minimizing potential losses if the price continues to fall. However, a key pitfall is assuming support will always hold; if a price breaks cleanly below a support level, it often signals a bearish trend change, and that old support level frequently turns into a new resistance level.

A stock declines from $65 to $50 and then bounces back up to $58. A few weeks later, it falls to $50 again before rising to $60. Because the price stopped falling at $50 on two separate occasions, technical analysts identify $50 as a key support level. A trader might buy the stock at $51 with a stop-loss order set at $49 to limit their risk.