Stock Support

Stock support is an imaginary line at which a stock will hit a bottom and head up. This is opposed to resistance which is the imaginary top of a given stock.

Support appears after a stock has hit a given level two or more times and has bounced upward after hitting that level. There are two ways in which you can draw a support line. The first is when the stock hits a flat level of support and keeps bouncing off of that level.

How to Use Support When Trading

So, how do you use support when trading? Professional traders will draw a line illustrating where the support is in a given stock and then use it as a buy signal.

Since the stock typically bounces up off of resistance a trader may decide to buy a stock at support hoping to get a bounce off of that stock and hold onto it until to reaches its resistance level, or the imaginary top level of stocks.

A good trader would also use proper risk management in case the stock broke down below support.

What If The Stock Breaks Below Support?

Instead of bouncing up off of support the stock may actually break down below it. If it does this level turns into a resistance level, where the stock is unlikely to break above. It is a very bearish signal and it indicates that the stock is likely to fall all the way down to its previous support level.