Support and Resistance

Support is the price level at which demand is thought to be strong enough to preventthe price from declining further. The logic dictates that as the price declines towardssupport and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed thatdemand will overcome supply and prevent the price from falling below support.

Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

Candlestick Chart
A form of Japanese charting that has become popular in the West. The wide bodymarks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).