Price Support and Resistance - You can determine a stock’s price support and price resistance by looking at the history of the stock price movement over time. Price support can be thought of as the floor; price resistance can be thought of as the ceiling. What is of concern for investors is when the current stock price breaks below the floor or above the ceiling.

Identifying these two thresholds – the floor and the ceiling - and then casting a horizontal line through both the upper and lower points will help you determine where within this channel the current stock price is. This visual channel will also help you gage the potential gain or loss from the stock before you buy into it.

A breakthrough going through the floor can spell trouble for those holding that particular stock. On the contrary, a breakthrough going above the ceiling can indicate an opportunity to make money.

For example, if your stock falls below its historic price support level, you may want to dump it has soon as you can, depending upon your pre-set policies. On the other hand, if you spot a stocking rising above its price resistance level, you may use that as an indicator that it is a good time to buy into it.

People who are “in it for the long term” (i.e. holding a stock for several or many years) usually hire brokers to analyze stocks for them. Many of these brokers will use fundamental analysis primarily. For example, they look at a company’s sales, profits, profit margin, P/E ratio and so forth. While fundamental analysis has its place, stock chart analysis can often reveal “better” information more rapidly.

People who are looking to make money by ‘buying low and selling high’ need to learn how to do this themselves. Even if you are a beginner, you can learn basic principles of stock charts analysis that will help you master this art with a little bit of practice.

Plotting the support and resistance for a particular stock price is easy and can reward you immensely without spending a lot of time in your analysis.