Support Line
Support line is a price point that is difficult for stock prices to fall below when they are falling. This price point is usually a low point or an important support level in past stock trading. When the stock price falls, investors can judge whether they should continue to hold or sell the stock based on this price point.
Definition: A support line is a price level at which a stock's price tends to have difficulty falling below during a downtrend. This price point is usually a previous low or a significant support level in past trading. Investors use this price point to decide whether to continue holding or to sell the stock when its price is declining.
Origin: The concept of the support line originates from technical analysis theory, dating back to the early 20th century. Technical analysts observed that certain price points were repeatedly tested but not breached, leading to the formation of the support line concept.
Categories and Characteristics: Support lines can be categorized into static support lines and dynamic support lines. Static support lines are fixed at a specific price point, such as a historical low. Dynamic support lines move over time, such as moving averages. Static support lines are easy to identify but may lack flexibility, while dynamic support lines better reflect real-time market changes but require more calculation and analysis.
Specific Cases: Case 1: A stock has repeatedly found support at the 50 yuan price point over the past year, rebounding each time it approaches this level. Therefore, 50 yuan becomes the support line for this stock. Case 2: A stock's 200-day moving average has provided support multiple times over the past few months, with the price rebounding each time it nears this moving average. Thus, the 200-day moving average becomes the dynamic support line for this stock.
Common Questions: 1. Is the support line always effective? Support lines are not always effective; market sentiment and external factors can cause them to be breached. 2. How is the support line determined? Support lines are usually identified through historical price data and technical indicators but need to be analyzed in the context of the overall market environment.
