Support and Resistance basically equals Supply and Demand. If previously a market has fallen from a particular price level then when it re-visits that price there could well be some “supply” (resistance) remaining. This is again cause price to either fall again, or at least to stall any upwards progress and require the market to build up some “inbalance” or pressure, before being able to continue upwards.

The lines are therefore drawn at levels where previous tops and bottoms occurred. Note that tops are usually Support on the way back down, but also of course Resistance on the way Up.

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