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Zone of Resistance

The "zone of resistance" is a price range or level in technical analysis where a financial asset or security faces significant selling pressure. It is a zone where the price historically struggles to break through or sustain upward movement, potentially leading to a reversal or a slowdown in price appreciation.

What You Need To Know

When the price of an asset reaches the zone of resistance, it may encounter increased selling activity, as traders and investors take profit or sell their holdings. This can lead to a reversal in the price trend or a period of consolidation where the price remains range-bound within the resistance zone.

While the zone of resistance suggests a potential barrier to price advancement, it does not guarantee that the price will reverse or consolidate. If the price manages to break through the resistance zone with significant buying pressure, it could lead to a bullish breakout and further upward movement.

The zone of resistance is often accompanied by a corresponding support level, which is a price level or range where the asset has historically found buying interest and faced upward price support. Traders and investors consider both support and resistance levels to assess the overall price dynamics and potential trading opportunities.