what do support levels tell you 
support level is the level at which buyers tend to purchase or enter into a stock it refers to the stock share price that a company rarely goes below the support level holds and is confirmed when the price of a stock falls toward its support level or the stock continues to decline the previously demonstrated support level must change to incorporate the new lows when this occurs support and resistance levels are at the core of technical analysis fundamental analysis takes a company s performance and history into account to determine the future direction of the stock technical analysis uses patterns and trends in price 1support levels in stocks can be created by limit orders or the market action of traders and investors traders use support and resistance levels to plan entry and exit points for trades depending on what the trader sees from other indicators it can be an opportunity to buy in or take a short position if the price action on a chart breaches the support levels it may even be a sign of a reversal if the breach occurs on an uptrend example of how to use support levelslet s say you re studying the price history of shares in the fictional montreal trucking company with the ticker symbol mtc you re trying to identify an ideal time to enter a long position in the company mtc has traded between 7 and 15 per share over the last year the stock climbs to 15 during the second month of the period you re studying mtc but it s fallen to 7 by month 4 it climbs again to 15 by month 7 before falling to 10 in month 9 it climbs again to 15 by month 11 and it falls to 13 over the next 30 days before climbing again to 15 you ve established a support level of 7 and a resistance at 15 at this point you can set a buy order at the lower end of the range if there are no other worrying factors on the technicals or fundamentals there s a risk that an uptrend will be established if you set the order right at the support level of 7 your order may never be executed even though you correctly identified the upside it s important to consult more nuanced indicators in addition to simple support limitations of using supportsupport is more of a market concept than a true technical indicator many popular indicators incorporate these concepts including price by volume charts and moving averages these are more actionable than the simpler visualizations traders will generally want to see the support band rather than a single line connecting the lowest lows because there s always a chance that support will move up and the order for a long position will go unexecuted 