support level

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Support level

A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a security tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the stock has bottomed out in the past.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


In technical analysis, a price that a security does not or only rarely falls below. Technical analysts identify a support level by looking at past performance. It is seen as an indication to buy the security, which will increase the demand, causing the security's price to move above the support level. The demand comes from investors who fail to buy the security at the support price, and resolve to do so if it reaches that price again. If buyers are not forthcoming, however, the security falls below the support level. When this occurs, the price of the security will likely continue to drop until it finds another support level. See also: Price floor, Resistance (Resistance level).
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

support level

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support level
A price at which a security or the market will receive considerable buying pressure. Technical analysts believe demand at the support level will tend to keep a stock's price from falling below the support-level price. A support level develops as investors miss purchasing a stock just before a price rise and resolve to buy the stock if it again reaches that level. Compare resistance level.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Market insiders sometimes identify support and resistance levels using private information or information circulated informally in the market about certain market participants.
Simple market psychology is also used to help identify support and resistance levels.
Some of the firms in the sample provided explanations for their chosen support and resistance levels.
The data examined here include support and resistance levels for the mark, yen, and pound in relation to the U.S.
For individual firms, the average number of support and resistance levels (combined) that were listed per reporting day per currency ranges from two to eighteen (Table 1).
TABLE 1 Average Total of Support and Resistance Levels per Reporting Day German Japanese British Firm Overall Mark Yen Pound 1 10.0 10.0 10.0 10.0 2 6.0 6.0 6.0 6.0 3 17.8 18.1 18.0 17.5 4 9.0 9.2 8.8 -- 5 4.2 4.8 3.8 4.0 6 2.5 2.7 2.3 --
The support and resistance levels were quite close together for some firms and quite far apart for others.
TABLE 2 Average Distance between Support and Resistance Levels German Japanese British Firm Overall Mark Yen Pound 1 30 36 29 26 2 61 75 52 55 3 54 58 49 54 4 57 64 49 -- 5 162 156 184 144 6 42 47 36 --
Firms also varied dramatically in the range over which they chose to present support and resistance levels applicable to a given day (Table 3).
TABLE 3 Average Gap between Current Spot Rates and Outermost Support and Resistance Levels German Japanese British Firm Mark Yen Pound 1 3.45 2.56 2.38 2 3.71 2.38 2.63 3 8.32 6.73 7.15 4 5.52 3.79 -- 5 4.96 5.13 4.52 6 1.24 0.74 -- Daily ranges Average 0.45 0.33 0.37 Maximum 3.23 3.88 3.28
More than 70 percent of the support and resistance levels in the sample end in 0, and a full 96 percent end in either 0 or 5 (Table 4).
To analyze the extent to which support and resistance levels published by a given firm vary from day to day, I counted the number of support and resistance levels shared across days for a given firm, and compared it with the maximum number of levels that could have been shared.

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