This is how Investopedia defines it -
Resistance (resistance level) is a price point on a chart in which upward price movement is impeded by an overwhelming level of supply. Resistance levels are characteristically found at the upper levels of range bound markets.
Here's a simple explanation -
How high the balloon in the picture below can go? - ceiling right. The ceiling offers the resistance
The same happens with stock prices. Resistance is like a ceiling. It prevents the stock prices from going higher, till something happens that breaks the ceiling. When stock prices break the ceiling - it's called breakout
Here's one example: Just see how ICICI Bank is struggling to cross the resistance for now more than 18 months
The level of 290-294 is acting as a ceiling for ICICI Bank stock. And every time stock goes there - it faces selling. One should follow stocks near resistance because when they breakout - it results in profitable opportunity.
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers