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In technical analysis, How are key price levels determined?

Key price levels in technical analysis are determined by using a combination of chart patterns, trend lines, and previous support and resistance levels.

Chart patterns are one of the most common methods used to determine key price levels. These patterns, such as head and shoulders, triangles, and flags, provide clues about the direction and strength of a stock’s price movement. By analysing the shape, size, and duration of these patterns, technical analysts can identify key levels where the stock’s price is likely to change direction.

Trend lines are another important tool in determining key price levels. These lines are drawn on a stock’s chart to connect the highs and lows over a specific period of time. By analysing the angle and slope of the trend line, technical analysts can identify areas where the stock’s price is likely to break out or reverse.

Previous support and resistance levels are also used to determine key price levels. Support levels are the levels where the stock’s price has consistently found support and has not fallen below. Resistance levels are the levels where the stock’s price has consistently faced resistance and has not risen above. By identifying these levels, technical analysts can predict where the stock’s price is likely to encounter resistance or support in the future.

In conclusion, key price levels in technical analysis are determined by using a combination of chart patterns, trend lines, and previous support and resistance levels. By analysing these factors, technical analysts can make informed predictions about the direction and strength of a stock’s price movement.

“When a falling stock becomes a screaming buy because it cannot conceivably drop further, try to but it thirty percent lower” – Al Rizzo

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