Resistance is a price area where selling has capped rallies before, such as a prior swing high or yesterday's high. Once price breaks above resistance and holds, that level often acts as support on a retest.
Example
Suppose rallies in a stock stalled near $72 twice last month. If it then closes at $73.50 and pulls back a few days later to $72.20 before turning up again, the old $72 resistance has acted as support on the retest. Had it fallen back to $70 instead, the breakout would look much less convincing.
Hypothetical numbers, for illustration only.
A chart labeled with this section's terms: a range between green support and red resistance at $50; a false breakout that trades up to $50.20 and closes at $49.85; a breakout that closes above $50; a retest where old resistance acts as support and the zone turns green; then a pullback and an uptrend of higher highs and higher lows.
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.