Advertisement

Resistance points

Shares can often trade in channels, rarely breaking below or above consistent minimum and maximum prices. Those are a stock's resistance points.

Resistance points are critical to car buyers. Say you budget to spend £10,000. You will happily buy from a dealer for £9,999, but not £10,200 without a big push. The same rule applies to stockmarkets.

Shares, for example, can often trade in channels, rarely breaking below or above consistent minimum and maximum prices. Those are a stock's resistance points.

Advertisement - Article continues below

Chartists spend hours trying to work out where these are and how strong they are how often a stock retraces to a previous one is a good starting point. They also try to work out when a resistance point will be broken, sending the share much higher or lower.

The trick is to try and position yourself ahead of the 'break out'. Fibonacci's golden mean is one way to try and locate resistance points, but there are plenty of others too.

Advertisement
Advertisement

Recommended

Visit/glossary/bonds
Glossary

Bonds

A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020
Visit/spending-it/glossary/601300/quantitative-investing
Glossary

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020
Visit/glossary/quantitative-easing-qe
Glossary

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020
Visit/glossary/600702/emerging-markets
Glossary

Emerging markets

An emerging market is an economy that is becoming wealthier and more advanced, but is not yet classed as "developed".
24 Jan 2020

Most Popular

Visit/investments/stockmarkets/601423/as-full-lockdown-ends-what-are-the-risks-for-investors
Stockmarkets

As full lockdown ends, what are the risks for investors?

In the UK and elsewhere, people are gradually being let off the leash as the lockdown begins to end. John Stepek looks at what risks remain for invest…
29 May 2020
Visit/economy/global-economy/601420/james-ferguson-the-virus-the-lockdown-and-what-comes-next
Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020
Visit/investments/property/601411/can-the-uk-housing-market-escape-a-slump
Property

Can the UK housing market escape a slump?

The Bank of England is predicting a 16% slump in house prices.
29 May 2020