Resistance (Line/Level)

[ Re-zis-tuhns lev-uhl ]

Resistance levels tend to stop and revert to rising prices, requiring greater buying pressure to overcome them.

What Is A Resistance Level?

In technical analysis, the resistance level is a price point that tends to push the price down. It’s a “level” above the current price where the trading supply (selling orders) exceeds the demand.

Other indicators can be correlated with the resistance, including high RSIs (relative-strength index), sell walls, and bearish MACD crossovers.

An example representation of resistance and support levels | Source: KuCoin.com

Traders observe support and resistance levels to identify the best time to buy and sell, respectively.

Understanding the Distinction Between Resistance and Support Levels

The “support” is the opposite of the resistance line. It’s the price where the buying liquidity is concentrated. With enough trading volume, the support level can absorb the selling pressure and temporarily stop a downtrend.

Short term, asset prices tend to move between the resistance and support trading zones. As prices approach or cross them, both create trading opportunities:

Buying strategy: Traders tend to profit when buying near the support line or right above the resistance line (bullish breakout)
Selling strategy: Traders tend to avoid losses when selling near the resistance line or right below the support line (bearish breakout)

This is because assets have multiple support-resistance ranges, both below and above the current one. If the price breaks the resistance, it tends to keep rising until the neon xt, which is a higher support zone. If it breaks the support zone, the next support will likely stop it.

Note: Certain prices can act as both support and resistance depending on where they are currently traded.

For example, Bitcoin may find resistance to breaking $70,000, but once it’s above (e.g., $72,000), the $70,000 acts as support, preventing it from falling below.

Example: two price ranges united by a single resistance-support line | Hackernoon.com

Resistance Analysis Example

Let’s see the different opportunities that appear as the support and resistance levels change. Assume a $67K Bitcoin with the following price ranges:

$50K to $55K
$60K to $65K
$65K to $69K
$72K to $75K

*Support and resistance range examples for Bitcoin | Source: Binance.com*

Bitcoin rises to $69K:

It bounces and stays above $65K (sell)
It breaks $69K and settles at $72K (buy)

Bitcoin falls to $65K:

It can bounce back up to $69K (buy)
It can fall to $60K (sell). This is likely since the lower range ($60K to $65K) is next to it.

Bitcoin falls to $60K:

It reverts up to $65K (buy)
It falls to $50K (sell). This price range is farther away and less likely

Also, notice the range width. The 4th zone has the thinnest range ($72K to $75K), which usually means better price stability.

Conclusion: The Role of Resistance Levels in Crypto

Support and resistance levels are essential landmarks for crypto investing, even for non-technical traders. These levels may reveal a local bottom or top and even trend changes. It’s important also to compare the support-resistance with their distance from other zones.

To better assess the probability of breakouts, traders also observe the volume history and moving-average indicators with 4-24h timeframes.

Written by

Michael Healy

Michael, an entrepreneur, and co-founder of Unit, is a full-stack, mobile, and blockchain developer with extensive experience in the crypto and blockchain industry since 2010. A leading token builder, Unit powers the token economy using the Polkadot-powered Unit Network blockchain.

Michael has built a diverse portfolio with multiple successful exits, including encrypted P2P video conferencing, a large UK student social network, and the Wikileaks Android app. He has experience working with top organizations like Wellington Partners, Founders Forum, Google, KPMG, and Saatchi & Saatchi.