Zone of Resistance

A zone of resistance is a price level at which a stock or other financial instrument has repeatedly failed to rise above. This level can act as a ceiling, preventing the asset from further gains.

There are a few reasons why a zone of resistance might form. One possibility is that there is a large number of investors who are willing to sell at that price. This could be because they believe the stock is overvalued, or because they are simply taking profits. Another possibility is that there is a technical indicator, such as a moving average, that is acting as resistance.

When a stock approaches a zone of resistance, it is often met with selling pressure. This can cause the price to pull back, even if the underlying fundamentals of the company are strong. This is why it is important to be aware of zones of resistance when trading stocks. If you are bullish on a stock, it is best to wait until it breaks through a zone of resistance before entering a position.

There are a few ways to trade around a zone of resistance. One option is to simply wait for the stock to break through the level before entering a position. Another option is to sell short when the stock approaches the resistance level. This can be a risky strategy, however, as the stock could break through the resistance level and continue to rise.