Support and Resistance level
The more often a support level or resistance level is tested (but not broken), the stronger and more significance is this particular level.
The more recently the support or resistance level is formed, the more important is the level in terms of impact on the subsequent market movements.
Support and resistance levels reverse roles once they are broken. If a price drops below a support, that level often turns into a new resistance level and vice versa. The logic is that the break of support signals the supply have overcome demand and therefore, if the price bounces back to this level, there is quite likely to see an increase in supply, and at the same times those who have bought before the support was broken tend to look to square their position on such a move, hence increasing supply as well. Similar principle also applies to the concept of resistance turning into support.
The more recently the support or resistance level is formed, the more important is the level in terms of impact on the subsequent market movements.
Support and resistance levels reverse roles once they are broken. If a price drops below a support, that level often turns into a new resistance level and vice versa. The logic is that the break of support signals the supply have overcome demand and therefore, if the price bounces back to this level, there is quite likely to see an increase in supply, and at the same times those who have bought before the support was broken tend to look to square their position on such a move, hence increasing supply as well. Similar principle also applies to the concept of resistance turning into support.