Role reversal
A former ceiling that price has closed above becomes a floor, or a former floor that price has closed below becomes a ceiling.
What it shows
When price breaks through a level, the level often switches jobs. A resistance that is broken may act as support on the way back down. A support that is broken may act as resistance on the way back up.
The reason people give is memory: traders who were stuck at the old level look to exit when price comes back. It is a common idea, but price does not have to follow it.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Find a horizontal resistance (or support) with at least 2 touches.
- Mark the first close beyond it by more than the margin.
- After the break, find a bar that reached back to within the tolerance of the level.
- Mark a successful reversal if price then closes away from the level on the new side.
Starting values: Break margin 1.0% of price; Retest tolerance 1.0% of price; Max bars between break and retest 40. These are proposed and will be tuned on real price data before launch.
How to read it
- Red dots are the old resistance touches.
- The gold dot is the break.
- The teal dot is the retest, now acting as a floor.
Status labels you may see
| Label | What it means |
|---|---|
| Level intact | No close beyond the level yet. |
| Broken | Closed beyond the level. |
| Retested | Price returned to the level. |
| Reversal held | Price left the level on the new side. |
What cancels it
A close back on the original side of the level cancels the reversal.
What traders check next
- How many times the level was touched before the break.
- Volume on the break and on the retest.
- How many bars the retest took.
Limits
- Many levels break without ever being retested.
- Retests may fail.
- The tolerance decides what counts as a retest.
Try it in forecastviz
- Open any ticker and choose Support and resistance → Role reversal in the left menu.
- Switch between 3M, 6M, 1Y to see how the picture changes.
- Compare with Horizontal support and Horizontal resistance on the same chart.
Questions
Why would resistance become support?
A common explanation is that traders anchored on that price look to act again when price returns to it.
Is it proven?
It is a widely held observation. We do not claim a rate.
Related trends
Further reading
- Murphy, Technical Analysis of the Financial Markets
- Edwards and Magee, Technical Analysis of Stock Trends
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.