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What Is the Support Level of a Stock? Definition, Example & Explanation

Support—the opposite of resistance—is the price below which a security doesn't drop over a particular period of time.
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Darkened image of a candlestick price chart for a security with text overlay that reads "What Is a Support Level?"

A stock's support level is its theoretical price floor for a given period of time. 

What Is Support in Stock Trading?

A support level—often referred to simply as “support”—is a price below which a stock doesn’t tend to fall over a given period of time. In other words, it is the presumed “floor” price of a particular stock—until it isn't. Support is the opposite of resistance. A stock’s resistance level is the price it tends not to exceed over a given period of time.

Stocks fluctuate in value constantly—some more so than others. The more a stock's price fluctuates, the more volatile it is. For any particular stock, price fluctuation occurs between support and resistance levels like a ball bouncing between two invisible walls. A stock’s support and resistance levels can change if a stock breaks out of its support-resistance channel.

Think of a stock’s support level as a straight line that connects two or more of its low points. If a stock is trending up in price outside of short-term fluctuations, its support line might be at an incline. If a stock is trading down in price outside of short-term fluctuations, its support line might be at a decline. If neither is the case, its support line might be near horizontal.

Note: Some traders only use horizontal lines to represent support and resistance, while others prefer to use diagonal lines, which represent changing support and resistance prices over time. Horizontal support and resistance lines are referred to as “static,” while diagonal lines are referred to as “dynamic.”

What Timeframe Should Be Used to Draw Support Lines? 

Two different investors might draw two different support lines depending on the respective time frames each wishes to examine. A longer-term investor might look at a security’s price performance over five years when drawing a support line so that they can identify a longer-term price floor near which they might wish to buy in if they plan to hold for a long period.

A shorter-term investor might look at the same security’s price performance over, say, six months when drawing a support line so they can identify a shorter-term price floor near which they would feel comfortable buying in if they plan to hold for a shorter time (e.g., until the security near’s its short-term resistance level). Because these two investors have different goals, they would draw different support lines on different graphs.

A day trader would probably look at the shortest-term chart for a given security, as they would aim to use technical analysis to identify buy and sell signals each day, and potentially multiple times per day. 

What Is a Resistance Level?

Resistance is the opposite of support. If a stock’s support level represents its theoretical price floor, its resistance level represents its theoretical price ceiling. It is the price a stock is unlikely to rise above over a given period of time. Like a support line, a resistance line can be horizontal, at an incline, or at a decline depending on the direction a stock’s price is trending over the longer term. 

A graph of Boeing's price performance from 06/21/21 through 12/21/21 with support and resistance lines drawn in

The black lines on the chart above represent dynamic support and resistance levels for Boeing for the six-month period from 06/21/21 through 12/21/21. 

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Support Level Example: Boeing (NYSE: BA)

The image above features a graph of Boeing’s stock price from 06/21/21 through 12/21/21. As you can see, the stock’s price trended generally downward during this period. Dynamic support and resistance levels are illustrated with black lines. As you can see, during the period shown, Boeing’s price didn’t always fall all the way to support when it was in decline, and it didn’t always rise all the way to resistance when it was going up.

This illustrates an important point, which is that these levels are theoretical and far from absolute. There is no guarantee that a stock will decline all the way to its support level or rise all the way to its resistance level over any given period. This is why most traders who incorporate these concepts into their buying and selling decisions place sell orders a little bit below resistance and place buy orders a little bit above support—this way, these trades are more likely to execute.

What Does It Mean When a Stock “Breaks Out?”

A “breakout” occurs when a stock’s price moves below an established support level or above an established resistance level—especially after not moving outside of these levels for some time. 

Breakouts are typically characterized by higher-than-usual trading volume and may be triggered by the emergence of a piece of information that traders feel is relevant to a stock’s value. Interestingly, when a breakout occurs, a stock’s old resistance level often becomes its new support level (or vice versa).

How Do Investors Use Support and Resistance Levels to Make Trading Decisions?

Different investors use support and resistance levels differently when making trading decisions, and some investors—especially those who prefer fundamental analysis to technical analysis—don’t pay these theoretical price limits any mind whatsoever. That being said, any sort of investor might benefit from timing their buy and sell decisions based on a stock’s proximity to a support or resistance line.

For example, a long-term value investor who has identified a stock they believe is undervalued might look at that stock’s once-year support level and wait to buy until the stock nears that level so as to maximize their eventual gains. An investor who is bearish on a stock might wait until that stock approaches resistance before shorting it or buying a put option on it. A day trader or swing investor might draw very short-term (e.g., one week or even one day) support and resistance lines and buy and sell a stock accordingly (multiple times) as it approaches these limits.

Support Levels and Technical Analysis

Support and resistance levels are closely tied to technical analysis, which is the process of examining a security’s price movement and trading volume over time and using these factors to make predictions that can inform trading decisions. In other words, support and resistance levels have very little to do with a stock’s fundamentals.

Fundamental analysis, on the other hand, involves examining company-specific metrics like cash flow and P/E ratio and company-specific qualitative factors like management skill and competitive advantage in order to determine whether a security is undervalued or overvalued.

Support and resistance levels fall under the umbrella of technical analysis rather than fundamental analysis because they are based on trading prices and trading volume—not on the value, merit, sales, or prospects of a company.

Frequently Asked Questions (FAQ)

Below are answers to some of the most common questions investors have about support levels that were not already addressed in the sections above.

Do Cryptocurrencies Like Bitcoin Have Support Levels?

Because cryptocurrencies like Ethereum and Bitcoin fluctuate in value and are used by many investors as trading instruments, many crypto investors do use support and resistance lines to make buying and selling decisions like they would with a stock.

Should I Wait to Buy a Stock Until It Reaches Its Support Level?

In a healthy market, most securities tend to go up in value over the long term. For this reason, support may increase, so waiting to buy until a security reaches a previous support level may not always be the best choice. Instead, choosing a buy-in price that is near but above a previous support level may be a more realistic way to open a position. 

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