Resistance(redirected from mechanical resistance)
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Resistance, or resistance level, is the top of a stock's current trading range, and the point at which the price is higher than investors are willing to pay. As stockholders sell at resistance level, the stock price goes down because supply exceeds demand.
For example, if, on a repeated basis, as stock A's price reaches $60, stockholders begin to sell, then $60 is considered its resistance level. But a trading range isn't fixed and investor attitudes change, so the resistance level tends to move higher or lower over time.
If stock A rises to $63 without a surge of selling, the current resistance line has been breached. This may be the result of a rising market or a bullish assessment of the stock's value. On the other hand, if selling increases at $57, that may become the new resistance level.
Conversely, the level at which demand exceeds supply and investors typically buy a certain stock is called support. It's the point that's considered the bottom of a stock's current trading range.
Technical analysts use the concepts of resistance and support in anticipating future stock price movements.