| ESU9 For 07/23/2009  |
|
| Symbol | R1 | R2 | Pivot | S1 | S2 | |
| ESU9 | 956.33 | 963.17 | 949.92 | 943.08 | 936.67 | |
A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.
A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level.
Support and resistance identify areas of supply and demand. But what exactly is supply and demand?
Supply is an area on a chart where sellers are likely going to overwhelm buyers causing the price to go down. On a chart, we call this resistance.
Demand is an area on a chart where buyers are likely going to overwhelm sellers causing the price to go up. On a chart, we call this support.
Knowing this, it only makes sense to buy at support and sell at resistance!
Prices run into resistance (supply) because those traders that bought too late and saw the price go down now want to get out at break even so they sell. Pricing will find support (demand) because those traders that missed the move up now have a second chance to get in so they buy.
