Support and resistance zones
Bands instead of single lines: price ranges where turns have kept happening, because turns rarely land on exactly the same price.
What it shows
Real turning points are spread over a small range. A zone covers that range, so it is wider and more honest than one line.
Our code groups nearby swing points into a cluster, and the zone covers the cluster from its lowest to its highest point.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Find swing highs and swing lows.
- Cluster points that are within 2% of each other.
- Keep clusters with at least 3 points.
- Draw a band from the lowest to the highest point of each cluster.
Starting values: Cluster distance 2.0% of price; Minimum points 3. These are proposed and will be tuned on real price data before launch.
How to read it
- Red bands are resistance zones. Teal bands are support zones.
- The thicker the band, the more spread the turns were.
- More points in a band means it has been tested more often.
Status labels you may see
| Label | What it means |
|---|---|
| In a zone | The last close is inside a band. |
| Between zones | Not inside any band. |
| Beyond a zone | Closed past a band. |
What cancels it
A close beyond the far side of the zone.
What traders check next
- How many times price turned inside each band.
- Whether bands are widening or narrowing.
- How close the nearest bands are to the last price.
Limits
- The cluster distance is a choice and changes the bands.
- A wide band is less precise.
- Bands can disappear when old points fall out of the window.
Try it in forecastviz
- Open any ticker and choose Support and resistance → Support and resistance zones 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 zones and not lines?
Price rarely turns at the exact same number twice. A zone shows the range.
How wide is a zone?
It depends on how spread the turning points are, up to 2% in our rule.
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.