In this lesson, you’ll learn about support and resistance levels, specifically horizontal lines and trend lines (which are diagonal). Unlike the moving averages, we talked about in the previous lesson, these horizontal lines and trend lines are static, and not dynamic. You actually have to plot these support and resistance levels yourself by analyzing price action and connecting the highs and lows. The point is that, if these support and resistance levels were rejected before, they may potentially react again and either reject those levels another time or break out instead.
It’s important to understand the difference between major support and resistance levels (which are being rejected consistently), and minor support and resistance levels (which are being rejected only once in a while, making them less significant but still worth taking into consideration). In order for a horizontal line or a trend line to be considered in your analysis, it needs to have more than 2 touches, at which point it can be considered a strong level.
Remember — what was once support becomes resistance, and what was one resistance becomes support.