Resistance Level

A resistance level is a key concept in technical analysis that refers to a price point at which an asset encounters significant selling pressure, preventing it from rising further. This level often represents a psychological barrier for traders, as many investors view it as an opportune moment to take profits or close positions. Resistance levels are determined through the analysis of historical price movements, where repeated failures to break above a certain price suggest that it is a significant resistance zone.

Resistance levels can be horizontal, where the price repeatedly fails to break through the same level, or dynamic, where the resistance level changes over time, often in line with a trendline. Traders often look for patterns and indicators to predict whether an asset will break through a resistance level or bounce back down. When an asset finally breaks through a well-established resistance level, it can signal a significant price rally, as it indicates a shift in market sentiment towards more aggressive buying.