Support and Resistance Levels with Bar Charts
Support levels indicate the price at which most traders feel that prices will move higher. There is sufficient demand for a security to cause a halt in a downward trend and turn the trend up. You can spot support levels on the bar charts by looking for a sequence of daily lows that fluctuate only slightly along a horizontal line. When a support level is penetrated (the price drops below the support level) it often becomes a resistance level; this is because traders want to limit their losses and will sell later, when prices approach the former level.
Like support levels, resistance levels are horizontal lines on the bar chart.
[caption id="attachment_13089" align="aligncenter" width="550"] Bar Chart with Support and Resistance Lines[/caption]
Many traders find lines of support and resistance useful in determining the placement of stop-loss and take-profit limit orders.