resistance level
A price point where a rising security tends to encounter selling pressure and stall, as sellers historically emerge at that price.
Example
“The stock repeatedly failed to break above $100 — a strong resistance level where sellers overwhelmed buyers.”
Memory Tip
RESISTANCE level = the ceiling where sellers RESIST further price increases.
Why It Matters
Understanding resistance levels helps traders and investors make better decisions about when to buy or sell securities. By recognizing where prices have historically struggled to rise above, you can plan your trading strategy more effectively and potentially avoid buying at peaks where you are likely to face losses.
Common Misconception
Many people believe that resistance levels are absolute barriers that prices can never break through, but this is incorrect. Resistance levels are just areas where selling pressure tends to emerge, and prices can and do break through these levels when market momentum is strong enough or when new information changes investor sentiment.
In Practice
Suppose a stock has traded between 45 and 50 dollars for several months, repeatedly pulling back when it reaches 50 dollars. A trader might identify 50 dollars as a resistance level and avoid buying near that price. However, if positive earnings news emerges and the stock breaks above 50 dollars with strong volume, the resistance level has been overcome and the trader would need to reassess their strategy for potential new price targets.
Etymology
RESISTANCE (opposing force) LEVEL (price point). A price LEVEL where selling RESISTS further advance.
Common Misspellings
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