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.
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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Watch out for fake Steven Bartlett video – you could lose thousandsScammers are trying to tap into the Trump tariffs chaos, but knowing what to look out for could save you thousands of pounds, says Kalpana Fitzpatrick
-
Can Donald Trump fire Jay Powell – and what do his threats mean for investors?Donald Trump has been vocal in his criticism of Jerome "Jay" Powell, chairman of the Federal Reserve. What do his threats to fire him mean for markets and investors?
