Opposite yet equal to support is resistance. Resistance can be thought of as a barrier to higher prices. As a stock’s price increases, it eventually hits a price barrier which it cannot penetrate. Once this barrier (or resistance) is hit, the stock stalls out, reverses direction and declines in price. Price resistance is graphically shown obstructing higher prices in Resistance Figure 1.
Many times resistance represents the maximum profit or reward that may be achieved in an investment. Risk/reward is another topic that should be considered in technical and fundamental analysis studies. Better insight on resistance can be gained with a quick review on moving averages, trends, Bollinger bands, and support technical analysis.
Resistance Figure 1