Level 1 — RecognitionSupport, Resistance & Price Action

Support, Resistance & Price Action

⏱ 20 minutes30 marksprintable — key stays hidden on paper

Chapter: 3.3 Support, Resistance & Price Action Level: 1 — Recognition Time Limit: 20 minutes Total Marks: 30

Section A — Multiple Choice (1 mark each, 10 marks)

Choose the single best answer.

Q1. A support level is best described as a price zone where:

(a) selling pressure typically overwhelms buying, halting a rise
(b) buying pressure typically overwhelms selling, halting a fall
(c) volume always drops to zero
(d) the market always reverses permanently

Q2. When a broken resistance level later acts as support, this is called:

(a) a false breakout
(b) role reversal (polarity flip)
(c) a pivot point
(d) a demand zone

Q3. A swing high is formed by:

(a) a low with lower lows on both sides
(b) a peak with lower highs on both immediate sides
(c) the highest close of the year
(d) any red candle

Q4. The classic (floor) pivot point is calculated as:

(a) $(H + L)/2$
(b) $(H + L + C)/3$
(c) $(O + C)/2$
(d) $(H + L + C + O)/4$

Q5. A false breakout is characterised by:

(a) price breaking a level and continuing strongly
(b) price breaking a level then quickly returning inside the prior range
(c) price never touching the level
(d) increasing volume on continuation

Q6. A retest after a breakout serves mainly to:

(a) guarantee a trend reversal
(b) confirm the broken level now holds in its new role
(c) reset all indicators
(d) create a new swing low automatically

Q7. Psychological round numbers (e.g. 100, 500, 1000) tend to act as S/R because:

(a) exchanges force trades there
(b) traders cluster orders at memorable price points
(c) they always mark the day's high
(d) they eliminate volatility

Q8. A demand zone on a chart is an area where:

(a) heavy selling previously drove price down sharply
(b) strong buying previously drove price up sharply
(c) price moved sideways with no interest
(d) the pivot point is located

Q9. "Price action without indicators" relies primarily on:

(a) moving average crossovers
(b) raw candles, levels and structure
(c) RSI divergence
(d) MACD histograms

Q10. With classic pivots, the first resistance R1 is given by:

(a) $2P - L$
(b) $2P - H$
(c) $P + H$
(d) $P - L$

Section B — Matching (1 mark each, 5 marks)

Q11. Match each term (i–v) to its definition (A–E).

Term	Definition
(i) Support	(A) Peak flanked by lower highs
(ii) Resistance	(B) Ceiling where selling caps a rise
(iii) Swing high	(C) Floor where buying halts a fall
(iv) Supply zone	(D) Level broken then returned inside range
(v) False breakout	(E) Area of prior heavy selling above price

Section C — True / False WITH Justification (3 marks each: 1 T/F + 2 justification, 15 marks)

State True or False and justify in one sentence.

Q12. "Once a support level is broken decisively, it can begin to act as resistance." (3)

Q13. "A single touch of a price level makes it a strong, reliable support/resistance zone." (3)

Q14. "The classic pivot point uses the previous period's high, low and close." (3)

Q15. "A breakout accompanied by a successful retest is generally considered more reliable than one without a retest." (3)

Q16. "Round numbers such as 1000 have no influence on trader behaviour or order placement." (3)

Answer keyMark scheme & solutions

Section A (1 mark each)

Q1 — (b). Support is where buyers step in and buying pressure overcomes selling, stopping a price fall. (1)

Q2 — (b). A broken resistance that flips to support is role reversal/polarity change — old resistance becomes new support. (1)

Q3 — (b). A swing high is a local peak with lower highs on both adjacent bars, marking a short-term top. (1)

Q4 — (b). Classic pivot $P=(H+L+C)/3$ , the average of the prior period's high, low and close. (1)

Q5 — (b). A false breakout pierces a level then reverses back inside, trapping breakout traders. (1)

Q6 — (b). The retest checks that the broken level now holds in its reversed role, confirming the breakout. (1)

Q7 — (b). Traders naturally place orders at memorable round figures, concentrating supply/demand there. (1)

Q8 — (b). A demand zone is where aggressive buying previously launched price sharply higher. (1)

Q9 — (b). Pure price action reads raw candlesticks, S/R levels and market structure, not derived indicators. (1)

Q10 — (a). $R1 = 2P - L$ in the classic pivot formula set. (1)

Section B (1 mark each)

Q11:

(i) Support → C (floor where buying halts a fall)
(ii) Resistance → B (ceiling where selling caps a rise)
(iii) Swing high → A (peak flanked by lower highs)
(iv) Supply zone → E (prior heavy selling above price)
(v) False breakout → D (broken then returned inside range)

(1 mark each correct pair; 5 total)

Section C (1 mark T/F + 2 marks justification)

Q12 — TRUE. (1) Justification: by role reversal, buyers who defended that support are gone once it breaks, so the level flips to a ceiling where trapped longs and new sellers create resistance. (2)

Q13 — FALSE. (1) Justification: reliability grows with multiple touches/reactions and confirming volume; a single touch gives weak, unproven S/R. (2)

Q14 — TRUE. (1) Justification: the classic pivot formula $P=(H+L+C)/3$ explicitly averages the previous period's high, low and close. (2)

Q15 — TRUE. (1) Justification: a retest that holds confirms the level has genuinely flipped and reduces false-breakout risk, giving a higher-probability entry. (2)

Q16 — FALSE. (1) Justification: round numbers act as psychological magnets where traders cluster stops and orders, so they demonstrably influence behaviour and act as S/R. (2)

[
  {
    "claim": "Classic pivot P = (H+L+C)/3 for H=110, L=90, C=100 equals 100",
    "code": "H,L,C = 110,90,100\nP = (H+L+C)/3\nresult = (P == 100)"
  },
  {
    "claim": "R1 = 2P - L gives 110 for P=100, L=90",
    "code": "P,L = 100,90\nR1 = 2*P - L\nresult = (R1 == 110)"
  },
  {
    "claim": "S1 = 2P - H gives 90 for P=100, H=110",
    "code": "P,H = 100,110\nS1 = 2*P - H\nresult = (S1 == 90)"
  },
  {
    "claim": "Pivot P lies between S1 and R1 for the example set",
    "code": "H,L,C = 110,90,100\nP=(H+L+C)/3\nR1=2*P-L\nS1=2*P-H\nresult = (S1 < P < R1)"
  }
]