| support Increased demand for a security. Compare resistance. |
Support. Support, or support level, is the bottom of a stock's current trading range, or the point at which the price is low enough to stimulate demand among investors. Strong buying at the support level moves the stock's price up from its low.
For example, if every time stock A's price drops to $40 investors begin to buy, then $40 is considered its support. But a trading range isn't fixed, so the support level tends to move higher or lower over time in response to changing market conditions and investor attitudes.
If stock A falls to $38 without a surge of buying, the current support line has been breached. This may be the result of a falling market or a bearish assessment of the stock's value. On the other hand, if demand increases at $43, that may become the new support level.
Conversely, the level at which supply exceeds demand and investors typically sell a certain stock is called resistance. It's the point that's considered the top of a stock's current trading range.
Technical analysts use the concepts of support and resistance in anticipating future stock prices.
What Does Support Mean?
The historical price level of a security that is used as a point of reference as the security's lowest trading price within a specific time frame. Many investors see this level as a buying opportunity. However, if the security trades below support, some believe that this is a sign that the stock price will drop further. Often referred to as the support level.
Investopedia explains Support
If the price of a stock falls toward a support level, it is a test for the stock: The support will be either reconfirmed or wiped out. It will be reconfirmed if a lot of buyers move into the stock, causing it to rise and move back up and away from the support level. It will be wiped out if buyers do not enter to buy the stock and the stock falls below the support.
Related Terms:
• Ask
• Bid
• Resistance
• Technical Analysis
• Volume
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