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Resistance Level A resistance level marks an area where there is a high probability that a stock or index will reverse to the downside. Resistance levels are generally established when there is a significant and highly concentrated VMA surge to the upside (i.e., Buying volume). Sometimes, a resistance level is also created by the buildup of cumulative volume to the upside.
When we speak of a "local resistance level", we are generally referring to an area where an index resists a move above a specific level due to the generation of Buying volume. A local resistance level has no lasting effect on the general market trend.
Traders can use information about the locations of resistance levels to anticipate the beginnings of new downtrends, thus allowing them to adapt their trading tactics to trading in a downtrending market. |
