Those approaches assume that the market will repeat its past behavior and experience in the same exact manner and can therefore be viewed with a linearly. They also bear fixed intervals for inputs which creates yet another problem. The market is not a static phenomenon and we cannot expect the market to disregard all the changes of economic and industrial Macroforces that constantly exert pressure on price movements. The market is most certainly a Complex and Dynamic phenomenon - but it is clear that price fluctuates between levels of support and resistance. In this article, I'll explain what levels of support and resistance are the most critical and how we as traders can identify them.
Support is a price level that exhibits a temporary fair value for the market.
Prior to that level, Sellers sell the market because they view it as being overpriced. The market is pushed down to a level where Buyers step in with more money to hold price at the new level. At that time, both sellers and buyers have made a decision regarding the overvaluation of the market based upon their individual systems of valuation. If the buyers now perceive this new level to be a good price for the market, they might flood the market with more buying pressure to hold the new level and eventually cause price to rise. In the case of a resistance level, buyers keep pushing price higher with buying pressure because of the good opportunity perceived with fair pricing.