Technical analysis is a method that uses historical price and volume data to make investment decisions in financial markets. In technical analysis, price movements create certain patterns and these patterns help predict future price direction. Another concept used in technical analysis is the support point.
A support point refers to the point where prices are lowest on a chart. The support point acts as a barrier that prevents prices from falling further. A downward price chart is not expected to continue falling after the support point. On the contrary, prices are likely to start rising or stay sideways after the support point.
To identify the support point, a line is drawn connecting the lowest price levels on the chart. This line indicates the support level. The more the support level is tested, the stronger it will be. If the support level is broken, that is, if the prices fall below the support level, this is interpreted as a sell signal. In this case, the support level turns into a resistance level.
The support point is an important tool in technical analysis. Being able to determine the support point correctly helps traders with the timing of trading. Buying near the support or selling while waiting for the support to break is a strategy based on technical analysis.