Technical analysts and traders use the concept of price support to decide where buying interest could show up in a stock. Typically, such individuals visually look over stock price charts to discover levels where the market price showed a notable reversal, forming a distinct high or low point on the stock’s chart.
If they observe reversals points that occurred under the stock’s current price level, they call these support levels. Conversely, reversal points that fall above the present market are termed resistance levels.
Should the stock’s price fall to overcome the anticipated buying pressure at an identified support level and decline below support, technical traders can take that as a bearish sign for them to establish a short position in the stock or close out any long position. Those who choose to sell the stock short will usually set their stop loss buy order levels safely higher than the broken level of support to safeguard their position if the market rises back over the breached support point.
Also, traders could seek confirmation by looking for selling interest to emerge when the support level in question breaks by looking for a rise in trading volume. They could also review popular momentum indicators, like the Relative Strength Index or RSI, for confirmation to see if new lows in the indicator are showing up as the price action also hits new lows.
Please find below an algorithmic scan results for the stock market that identify which stocks have recently broken below a computed support level and hence could offer a trader an interesting selling prospect.
