Help me understand concepts of support and resistance levels to analyse stocks.
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A lot of it has to do with self-fulfilling prophecies. If it is widely believed that a stock’s support level based on traditional charting techniques is at a certain level, trader’s will often position themselves based upon this. For instance if a stock has a support level at $200, you may have a proliferation of buy orders get triggered when the stock hit’s $200. This creates incremental demand and pushes the stock up off the $200 level.
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