A resistance level is a price area where supply has previously exceeded demand, causing price to stall or reverse after a rally. It often corresponds to a prior swing high, a round number, or a period of extended congestion. Sellers at resistance include investors who bought at lower levels and want to take profit, as well as those who bought at or above that level previously and want to exit at breakeven.
When an asset breaks through a resistance level with sustained momentum and volume, the break is often significant — the supply-demand balance has shifted. In trend-following frameworks, a breakout above resistance is one of the cleanest entry signals, as it suggests that the buyers have overwhelmed the sellers at a previously contested level.
Like support levels, resistance is psychological and probabilistic. A level that has held five times historically does not guarantee it will hold a sixth time. Resistance levels are most reliable when multiple technical factors converge at the same price — such as a prior swing high, a round number, and a key moving average all clustering in the same range.