What is Stock Resistance?

Stock Resistance is a level that is said to mark a stock top. The resistant line is a level that has been known to push a rising stock down.

There are two different types of resistance lines. The first way you can determine resistance is during a channeling stock. If a stock is channeling then it is not doing much. It is neither going up nor going down.

During this time the resistance line remains at one constant level. This one level is a point at which a stock will hit and bounce down lower.

How Would a Trader Use Resistance?

A trader may take a stock approaching the resistance level as a bearish signal. They may decide to sell it once it gets to resistance and buy it back once it gets to support (an imaginary bottom).

A good trader would use proper risk management in case the stock does break above its resistance level.

What if The Stock Does Break Above Resistance?

If a stock breaks above resistance the old resistance level becomes a new support level where the stock is likely to bounce up off of instead of down from. It is a bullish signal that indicated the stock is going to make new highs.

If the stock breaks through resistance it is likely to keep going up until it reaches the next closest resistance level. If the stock is making a new high and there is no other resistance level to watch out for then the stock will go up until it creates a new resistance level.

There are various chart patterns that try to estimate how big of a move a stock will make if it breaks through a resistance level. If you are interested in learning more about a breakout from a pattern you can get that information by visiting this chart patterns page.