A support level is a price area where demand has previously exceeded supply, causing price to bounce or stabilise after a decline. The logic is that traders and investors who missed buying at that price previously tend to step in again when price returns to it, creating a cluster of buying interest that can halt the decline.
Support levels are identified by looking for prior swing lows, congestion zones (areas where price traded for extended periods), round numbers, or moving averages that have acted as floors previously. The more times price has tested a level and bounced, the more significant the support is considered — until it breaks.
When a support level breaks decisively (price closes below it with volume), it frequently becomes resistance in subsequent rally attempts. This "support to resistance flip" reflects the psychology of trapped buyers above the break level who want to exit at breakeven. Support and resistance levels are price memory, not physical barriers — they reflect crowd behaviour and carry probabilistic rather than guaranteed significance.