Resistance Levels vs Support Levels
In the world of stock trading, there is something called technical analysis.
These stock traders focus heavily on looking at the charts of stocks to determine where the price is going next.
I will admit, this is not my specialty, but one aspect has always intrigued me.
The analysis goes much deeper than what I am going to share here, but the concepts remains the same.
Here it is…
As a stock trades in certain price levels, it begins to form support and resistance.
Let’s say a stock is trading between $10-$15.
If $10 is the lowest price that stock price has reached in that trading range, it acts as a support level.
That means, as the stock has reached that price in the past, investors stepped in and aggressively bought that stock.
That buying causes the stock price to go up.
This creates support, which helps keep the price from going below that support level – which is $10 in our example.
The opposite is also true.
As this stock trades closer to the $15 range – which is it’s high – it begins to see resistance.
That means investors may think it is over-priced and begin to sell it, which keeps it below that high mark – or the resistance.
It can be very hard for a stock to break through that upper level - hence why it is called resistance.
What Happens When These Levels are Broken?
It gets really interesting when either of these levels are broken.
When a stock breaks through it’s support, which is its low level, there is no telling how low it could go from there.
It could go all the way down to its next support level before finding traction.
If you own this stock, it will likely be uncomfortable until it finds that new support – which means you'll be losing money.
The opposite is also true.
When a stock breaks through its resistance – it’s high price – it can run nicely to the upside.
This is much more exiting than when it is dropping.
It is not uncommon for a stock to run 10-20% above that resistance level once it is broken.
This mostly comes down to how investors are feeling.
As a stock price drops, people become negative and are worried about holding onto that stock.
We saw this in March because of the virus.
When enough people sell, that causes the price to drop.
The opposite is also true.
When investors are confident, they buy.
That buying causes the price to go up.
We saw this during some of April and the month of May.
It really comes down to how people are feeling about the future of the economy and that particular stock.
The stock market is very much emotional based.
How Does This Apply to Me?
We as individuals are very similar to these stock charts.
Our lives are trading in these similar patterns.
These patterns represent the progress we are seeing in our individuals lives.
When things are going well, we are moving in an upward direction.
When things are going poorly, we are progressing downwards.
I think we can all agree that it feels much better to be progressing upward.
But the truth is, progress is difficult.
If we want to progress, it takes effort.
It takes discipline.
It takes work.
And in our own minds, or through our actions, we create these resistance levels that we have to break through.
Until we do, we feel restricted.
We often believe we cannot do it, especially if we are trying to reach a level we have never been to.
But, when we finally break through, watch out.
There is no telling what we can accomplish and how high we can go from there.
Unfortunately, the opposite is also true.
As we lose our momentum and start spiraling downward, it becomes scary.
We start to lose confidence.
We lose part of our happiness.
And if we break through certain low levels, it gets even harder to get back on track.
This happens to all of us.
The key is understating where these levels are and making sure we are guarding our progress very carefully.
Life is not easy, nor should it be.
It’s that struggle that makes us stronger.
The key in all of this is to maintain an upward trajectory.
That doesn’t mean that every day has to be an up day.
That would be crazy to expect.
But it is vitally important we keep the direction of our progress in an upward trend.
As simplistic as it sounds, I believe the key to happiness is progress.
When we are improving and making meaningful advancements in the important areas of our lives, we feel content.
We feel more optimistic.
We are confident.
We find happiness…
I would encourage you to do a deep scan of the important areas of your life and gauge your progress.
Are you trending upwards or backwards?
Are you defending against those lower support levels so that you can
maintain your momentum and progress?
Are you balanced so that all of the important areas are seeing equal progress, instead of just a few places?
I am confident that if we focus on this concept of progress, we will find more contentment in our lives.
That progress drives how we are feeling about ourselves just as price movement determines how investors feel about buying or selling a particular stock.
As we break through those resistance levels and reach new level of progress in our lives, there is no doubt we will see our happiness increase as well.
This feeling of improvement and progress is what drives us to become the best versions of ourselves!
Good luck on your journey!
Thanks for reading,
Founder 1911 Apparel