A resistance level is a key tool in technical analysis, indicating when an asset has reached a price level that market participants are unwilling to surpass.
Resistance levels are often used in conjunction with support levels, or the point at which traders are unwilling to let an asset’s price drop much lower. Traders will often identify areas of support and resistance in order to make decisions on trades, including when to place stops and limits.
If an asset does break through its resistance level, then some traders believe it will carry on rising in price, or ‘rally’, until a new resistance level is found.
